In the era of Corona epidemic, it has become more important for people to pay attention to their health. This pandemic has taught people to take care of their health and be prepared for any calamity to come. During this, the attraction of people towards insurance has also increased.
There are many types of insurance policies available in the market. Before buying an insurance policy, it is important to know about it. Let us know the difference between term insurance and traditional life insurance and their advantages and disadvantages.
The biggest difference between term insurance and traditional life insurance is the death benefit. The death benefit in a term insurance plan is available only if the insured person has died during the term period. Whereas in a life insurance policy, the insured gets both death and maturity benefits.
The amount of death benefit available in a term insurance plan is much higher than the maturity benefit available in a life insurance plan. However, most experts recommend taking a life insurance plan for the benefit of return on maturity with death. But there should be at least one term insurance plan, which provides more death benefit even in the minimum premium amount.
Cover and save on risk
In term insurance, on the death of the insured person, his family gets the death benefit. However, it does not have the benefit of return on maturity like a life insurance plan. Hence one can buy a term insurance plan, if they want to cover only the death risk and cannot afford to pay high premiums. However, if one wishes to build an investment corpus with life cover, he/she can consider investing in a traditional life insurance policy.
Discontinue policy midway
In a term insurance plan, if the person stops paying the premium, then his benefits will stop. And at the same time the policy will also be closed. But in a life insurance plan, the person gets the maturity benefit only when he finishes his entire term.
If he discontinues the policy midway, he will not be able to recover the entire savings of the policy. He will only get the premium amount back, that too after some deduction. Hence, discontinuing a term insurance policy is much easier than for a life insurance policy.
Amount of premium
If a person wants more coverage in life insurance, then he will have to pay a higher premium. Therefore, people are not able to take adequate coverage due to high premium.
Apart from this, life insurance policies give low returns (5 to 7 per cent), and it reduces further when the policy is discontinued in the middle. Term insurance plans, on the other hand, are much more affordable and offer more coverage at a much lower cost.