What are the benefits of Term Insurance policy and Traditional Life Insurance?
Considering today’s scenario and the growing number of uncertainties, life insurance is a necessary and essential product for every individual. There are ample life insurance products available in the market; however, choosing the right one for yourself as per your needs becomes very critical.
Opting for an ideal insurance policy depends on various factors such as age, income, number of dependents, policy tenure and the insurance coverage amount. Therefore, experts always advise doing your homework before buying life insurance as it helps in selecting the right insurance policy.
Term Insurance policy is one of the most affordable forms of life insurances which provides excellent benefits. If we compare it with traditional life insurance, then both have several advantages as well as disadvantages. So, let’s understand the benefits of both, which will help you analyse whether you should buy term life insurance policy online or invest in a traditional life insurance policy.
Cost of premiums: In the case of traditional life insurance, for higher insurance coverage, you need to pay a higher premium amount. Due to this high cost of premiums, most of the interested insurance buyers are not able to avail sufficient coverage for themselves. Also, traditional life insurance offers low returns and further gets reduced if the policyholder surrenders the policy. But the term insurance policy is more affordable and provides high life coverage against low premium cost.
Death benefit: If we talk about death benefit, the significant difference between the two is that term life insurance provides a death benefit if the policyholder dies within the policy term; whereas traditional life insurance offers both maturity and death benefit. The sum assured in term policy which is given as the death benefit is considerably more than the maturity benefit offered in traditional life insurance policies. But still, the majority of insurance buyers prefer buying traditional life insurance policies to avail dual advantage of life coverage as well as return on investment. However, it is always advised to have at least one term plan due to a substantial death benefit amount against minimum premium payment.
Risk cover and Maturity benefit: A term insurance policy secures your family’s future financially in your absence by providing a death benefit. It does not offer any maturity benefit like traditional life insurance policies as it is a complete protection plan. Therefore, if you want protection against life risk and don’t want to shell out money on expensive premiums, then term policy is the ideal option for you. However, if you want a life cover while building a saving corpus, then you should opt for a traditional life insurance plan.
Flexibility: It is much easier to surrender a term insurance policy than a traditional life insurance policy. If a policyholder wants to surrender term insurance, he or she can simply stop paying the premiums, and the policy benefits will be terminated, and further, the policy will lapse. But, in the case of traditional life insurance policy, the maturity benefit is given only when the insured person survives the policy term. And if the policyholder decides to surrender the policy before the policy term gets to end, then he or she will lose the entire saving portion. Additionally, almost all the term policies can be renewed after their tenure gets over or can be converted after their tenure gets over or can be converted into an endowment plan with the same coverage amount an increase in the premium amount or they can be converted into other forms of life insurance.
Tax benefits: People have this misconception that only expensive premiums of traditional life insurance policies are eligible for tax benefits under section 80C of the Income Tax Act. However, it is essential to know that though the premiums paid towards term insurance are low, but they eligible for tax benefit under section 80C of the Income Tax Act.
Life insurance policies must be included in financial planning for a safer future. If you are also planning to buy a term policy or traditional life insurance, then there are several considerations that you should keep while choosing the right one for yourself. The above pointers might help you in selecting either one of these based on your requirements. In case you want to understand term insurance policy or traditional life insurance in a better way, you can visit BimaKaro.in and speak to the insurance experts to make an informed decision.