Time period Insurance coverage Vs Life Insurance coverage – What's The Distinction? – Forbes Advisor INDIA – Forbes

Published: Sep 16, 2022, 10:00am
The life insurance policies do not only help you to create a long-term financial corpus for your future, but also ensures that your family has immediate financial support if any unfortunate event like death happens to you. Broadly, there are two types of life insurance plans i.e., term insurance policies and traditional life insurance policies. 
Here are the major differences between the two and which one you should consider in your financial plan. 
Term insurance is one of the most simple, basic and pure life insurance products. It provides compensation to the family or nominee only at the demise of the person insured. There is no saving component present in the term plans. Thus, they are only designed to offer death benefits and no survival benefits. 
Nowadays, to enhance the scope of coverage, many insurance companies provide optional riders such as accidental death benefit or critical illness cover. One of the best features of term plans is that they provide substantial coverage with low premium prices. For example, one can easily get a life cover as huge as INR 1 crore just by paying a premium of some thousand rupees.
To know more about best term plans available in the market, read our analysis of best term life insurance plans.
Term plans have basic features; however, they are varied in terms of premiums, sum assured coverage and riders.

Life insurance policies are designed to offer comprehensive and extensive coverage to the policyholder and their families. These kinds of insurance plans also provide the dual benefit of life cover along with a savings component; hence they are considered more expensive than pure and basic term plans.
In life insurance plans, the premiums are divided into two categories, where one part is allocated towards providing death benefit to the nominees, and the other chunk of premium is allocated to the investment and saving component. The best example of this is ULIP plans. 
Read our analysis on the Best ULIP Plans for more details.
Premiums paid are eligible for tax deduction under section 80C of Income Tax Act
Death benefits received by nominees are tax-free under Section 10(10D) of the Income Tax Act
Both life insurance and term insurance policies have their own benefits and drawbacks. On one hand, the life insurance plans provide lifetime coverage, flexible premium payment terms, assured maturity benefits, flexible income payout options at a higher premium cost. On the other hand, term plan is a pure life cover which offers only death benefit at a very lost cost and affordable premium range.  
So, to make a decision which kind of policy should be a part of your portfolio, totally depends on your financial goals and financial health of you and your family. 
Life insurance policies offer financial security to the entire family and dependents, if something happens to the life insured. It also helps to accumulate long-term savings which is paid to the policyholder once the policy matures and thus helps in wealth creation. These policies also help in securing your child’s future and help in paying off loans and liabilities, even if you will not be around.
The earlier the better. The minimum entry age of the term plan generally starts from 18 years and the maximum goes up to 65 years.
Whether to buy a term plan or not depends totally on your financial goal. Term insurance plans are the easiest and most affordable option that offers you the high sum assured coverage at low-cost premium rates.
The policyholder has the option of paying premium at once, or for a regular and limited period. One has the flexibility to choose the premium payment mode as per their requirement.
There is generally a grace period of 30 days in all the life insurance policies from the premium due date. If the premiums have not been paid further to the grace period, then the policy lapses along with all the benefits.
In case of term insurance, the premiums paid are not returned at the end of the policy. But, if you choose the option of “return of premium”, then in this case you receive back all the money that you paid as premiums, at the end of the policy.
Rashi Maheshwari is a Deputy Editor for Forbes Advisor India. She has more than a decade of experience working in news, public relations and communications. In the past, she has worked with CNBC Awaaz, CryptoWire, among others and has covered beats including insurance, personal investments and cryptocurrency. She is a travel enthusiast and would like to visit every country and try as many different culinary specialities as possible.


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