What Are the Differences Between Term and Life Insurance Plan?

What Is Term Insurance?

What Is Life Insurance?

What Are the Differences Between Life Insurance and Term Insurance Plan?

The following is the table delineating the underlying differences between term insurance and life insurance plans:

Parameters of Differences

Term Insurance Plan

Life Insurance Plan

Death and Maturity Benefits

With a term insurance plan, one can only secure their family’s financial security in case of their untimely demise. It comes with only death benefits.

The life insurance plan lets individuals get dual protection, i.e., both death and maturity benefits. Nevertheless, maturity benefits in this insurance plan are usually much lower than death benefits.

Tenure

Term insurance plans come at a fixed tenure like 5, 15, 30, or 35 years.

Life insurance plans come with extended tenure. In fact, the whole life insurance plans generally let policyholders stay covered till their age becomes 100 years.

Premium Amount

Term insurance plans come at a lower premium. Therefore, individuals can easily afford them despite their lower monthly income.

Life insurance premiums are higher since this plan offers both death and maturity benefits.

Surrender Value

When individuals stop renewing the term insurance plan, this plan lapses, and their coverage ends. In such a scenario, they will not get any return in terms of surrender value.

If individuals continue their policies for up to a certain number of years and then stop renewing them, their insurance providers will consider those policies as paid-up. Under this circumstance, their plans will continue, but the sum insured will decrease largely. Alternatively, policyholders can also close their policies on their own accord and get a surrender value.

Bonus

Term plans return only the sum assured amount after the policy owner’s demise, and there are no provisions for additional bonuses.

Life insurance plans may come with various bonuses in addition to the post-maturity endowment. These can include child plan, money-back plan, guaranteed addition, loyalty addition, etc.

Now that you know the differences between term insurance and life insurance plans, you can understand which one will suit your requirements. A term insurance plan will be suitable if you want to secure a life cover on a lower budget. On the other hand, you can proceed with purchasing a life insurance plan if you want to get a life cover and secure a decent post-maturity fund at the same time.

FAQs about Term and Life Insurance Plans

What is common between the term insurance and life insurance plans? up-arrow

Tax benefit is the only common ground of the term insurance and life insurance plan. Under Section 80C of the Income Tax Act of India, you can reduce your total premium amount from your taxable income for up to ₹ 1.5 lakh. Furthermore, Section 10D makes death and maturity benefits free from tax liabilities.

How can I claim death benefits under a term or life insurance plan? up-arrow

Here are the steps you need to follow to claim the death benefits of a term or life insurance plan:

Step 1: Contact the concerned insurance provider to inform them about policy owner’s death

Step 2: Fill in the intimation form and submit it

Step 3: Attach all the necessary documents

The insurance company will give you the policy benefit after validating your claim.

What are the documents that I need to submit to claim death benefits of a life insurance plan? up-arrow

Following are some of the basic documents that you will need to provide while placing a claim for the death benefit:

  • Original policy document
  • Beneficiary’s ID proof
  • Death Certificate
  • Age proof of insured person
  • Cremation certificate if applicable
  • Medical certificate and documents
  • Hospital records
  • Post-mortem report and FIR (for unnatural death)

Is the eligibility criteria for term and life insurance plan the same? up-arrow

Yes, the eligibility criteria for life insurance and the term insurance plans are almost the same. However, it may vary across the insurance companies. Following are some of the basic requirements you need to meet to be eligible:

  • Age: 18-65 years
  • Citizenship: Indian