Insurance is a crucial part of financial planning, yet many people struggle to differentiate between term insurance and life insurance. While both offer protection, they serve different purposes and work in different ways.
What is Term Insurance? Term insurance is a pure protection plan that offers financial coverage for a specified term. If the policyholder dies during the term, the nominee receives the death benefit. If the policyholder survives, no benefits are paid.
Key Features:
- Affordable premiums
- High sum assured
- No maturity benefit
- Simple to understand
Term insurance is ideal for individuals looking for high coverage at a low cost, especially if they are the primary breadwinners in the family.
What is Life Insurance? Life insurance, or traditional life insurance, combines insurance with savings. It pays out the death benefit in case of the policyholder’s demise or a maturity benefit if they survive the policy term.
Key Features:
- Higher premiums compared to term plans
- Maturity benefits
- Option to take loans against the policy
- Useful for long-term savings goals
Which One Should You Choose? If your priority is to secure your family’s financial future in your absence, term insurance is a smart and economical choice. If you’re looking for a plan that offers both protection and savings, a life insurance plan may be more suitable.
Conclusion Understand your financial goals before choosing between term and life insurance. Many experts recommend buying term insurance for protection and investing the difference in cost in high-return instruments for better wealth creation.
