Difference Between Term Life Insurance and Traditional Life Insurance

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Term Life Insurance vs Traditional Life Insurance Policy – What are the Major Differences

If you are confused between a term insurance and a traditional life insurance policy, two of the most common types of life insurance, read this post to know the parameters to make the right choice.

Term insurance and traditional life insurance are two most common insurance policies that people use to secure the lives of their loved ones. As such, no one can predict life and what is going to happen in life. The appearance of an unfortunate incident can take place any time in life creating great financial and emotional havoc. That is the reason why the head of the family seeks to have a life insurance policy to support the family in the event of their unfortunate demise.

Life insurance is a great way to help manage monetary risks by covering the insured and his/her family in times of emergency. Not only this, but term life insurance also helps under section 80C in tax deductions of up to Rs. 1.5 lakh.

Now,  term and life insurance are two most common types of life insurance policies. On one hand, term plans are pure protection policies that provide death benefits to the nominee of the insured. On the other hand, a traditional life insurance policy allows both maturity benefit as well as death benefit. However, term insurance is cost-effective and most affordable of all life insurance types.

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4 Things to Consider Before Choosing Between Term Insurance and Traditional Life Insurance

Here is a list of factors to take note of before you make your choice between a traditional life insurance or a term insurance.

  1. Death Benefit – The death benefit that is offered to the nominee of the insured in case of an unfortunate demise of the policyholder is the major cause of difference  between the traditional life insurance and term life insurance.  In term insurance, death benefit is received when the insured dies during the term of the policy, while if he/she outlives the term, the benefit is not provided. On the other hand, in case of traditional life insurance, the policyholder is entitled to maturity benefit as well as death benefit, thereby allowing double benefits. However, you may also note that as compared to the traditional life insurance, the amount of death benefit offered under term insurance policy is much higher.
  2. Flexibility to Surrender Policy – Another factor to consider is related to policy surrender. In case of term insurance, the policyholder can surrender the term plan easily without any hassle. However, this may not be that easy in case of traditional life insurance plans. Further, the insurer of your term plan might allow you to convert a term insurance plan into an endowment plan at an increased rate of premium. In traditional life insurance if the policyholder does not pay the premium, they lose all the benefits under the policy. Also, if they surrender the policy, they even lose out on the maturity benefits under the traditional life insurance policy.
  3. Premium Payment –  If you talk about term insurance, it is an easily affordable kind of life insurance that allows good coverage at low cost of premium. On the other hand, the best traditional life insurance plan  would require the policyholder to pay a high premium if he/she wants to receive high coverage.
  4. Tenure – The coverage under term insurance is offered for up to a particular age depending on your annual income, financial duties and so on. The maximum age limit for term insurance coverage is around 80  years. Conversely, in the case of a traditional life insurance policy, you can enjoy coverage from 5 to 100 years of age.

Also Read: Ways to Increase Cover Option In Term Insurance

Conclusion

If you consider the benefits of traditional vs. non-traditional life insurance products, both of them have their own unique advantages. However, one common benefit between both the plans is related to income tax, which is available under section 80C and 10D of IT Act, 1961.

As far as the premium payment condition is concerned, it can be paid on a monthly and quarterly basis as well as semi-annual and annual basis.  Added coverage can also be opted for adding riders to your plans including critical illness rider, premium waiver rider and so on at an extra cost.

As we all know that life insurance is a very significant investment that is done to keep your family secured monetarily in your absence. Thus, it is important to consider the above factors well while choosing the policy. Hence, do keep the parameters mentioned above in mind to make the right decision of life insurance policy purchase.

Found this post informational? Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance and Investment section. You can visit PayBima to Buy Insurance Online.

 

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PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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