Life insurance serves not only as a safety net but also as a financial asset. For families with a single breadwinner, it can be invaluable. However, many people find it challenging to choose between term insurance and traditional life insurance. Understanding the difference between the two is key to making the right decision.
Term insurance is a straightforward, pure-risk coverage plan. It ensures that if something happens to you during the policy term, your beneficiaries receive a pre-determined sum assured, or ‘death benefit.’ However, if you outlive the policy term, there is no payout. As a result, term insurance typically has significantly lower premiums compared to whole life policies, making it an affordable way to secure financial protection for your loved ones.
Key Benefits of Term Insurance:
* High Sum Assured
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Term plans allow policyholders to secure high coverage amounts for lower premiums. For example, you can get a cover of Rs 1 crore for a monthly premium of Rs 500-1,000, depending on age and health.
* Low Cost and Flexible Option
Since term plans focus only on life cover without additional savings or investment components, premiums remain affordable. Many term plans offer options to add riders, such as critical illness cover, accidental death benefits, or waiver of premium, which further enhance protection.
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Drawbacks of Term Insurance:
* No Maturity Benefit
Unlike whole life or endowment policies, term plans offer no payout if the policyholder survives the policy period, which some people may see as a disadvantage.
* Limited Term
Typically, term plans are offered for periods of up to 40 years or until the policyholder reaches 75 years, after which coverage ceases unless renewed or converted.
Understanding Life Insurance:
The term ‘life insurance’ often refers to whole life policies and endowment plans, which combine insurance coverage with an investment or savings component. This means that in addition to the death benefit,
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