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All About Term Insurance and Life Insurance?

16/09/2022 |

Life insurance has evolved into a crucial tool for the protection of family members who are financially dependent on us. In recent years, there has been a marked increase in the number of people purchasing life insurance to create a financial safety net for their loved ones.
 

However, there are different types of insurance plans available that can seem confusing to many people. One such type is term insurance.
 

What is Term Insurance?
 

Term insurance is a basic type of life insurance that offers coverage for a fixed duration and compensates the nominee in the event of the untimely demise of the policyholder. Policyholders need to make regular premium payments to keep the policy active.
 

Types of Term Insurance Plans
 
  • Level Term Insurance Plan – where you pay the same premium throughout the duration of the policy

  • Increasing Term Insurance Plan – where the coverage increases as you age

  • Decreasing Term Insurance Plan – where the coverage decreases as you age

  • Convertible Term Insurance Plan – where you can change the insurance plan whenever you want

  • Term Insurance Plans With Riders# – where the insurer offers add-on covers with the term insurance plan

What is Life Insurance?

Usually, when you buy life insurance plans, one part of the premium is used for providing death benefits, while the other part is saved to generate returns. The coverage offered is more extended than a term plan.

 

Types of life insurance plans
 
  • Whole Life Insurance Plan – where the insurer offers coverage for the entire duration of the life of the policyholder

  • Endowment Assurance Plan – where the policyholder receives maturity benefits on surviving the duration of the policy

  • Money-Back Plan – where the policyholder receives maturity benefits in instalments after the end of the policy term

  • Child Plan – designed to help you secure the financial future of the child of the insured person

  • Unit-Linked Insurance Plan (ULIP) – a combination of life insurance and market-linked investments

  • Pension Plan – where the policyholder receives a fixed amount every month after retirement
     
Term Insurance & Life Insurance
 

Here are some features about term & life insurance:
 

Features

Term Insurance Plan

Life Insurance Plan

Coverage

Death benefits only to the nominee of the policyholder 

Death benefits and maturity benefits to policyholders and their families

Maturity Benefits

A basic term insurance policy offers no maturity benefits to policyholders.

Most life insurance plans offer maturity benefits to policyholders. 

Term Period

Usually, term insurance plans are available for a tenor of 10 to 35 years

Typically, the term of a life insurance policy is 5-30 years. In whole life insurance plans, the coverage is for the entire duration of your life.

Flexibility

Some insurance companies offer add-on covers/riders# to help policyholders to boost the scope and extent of the policy.

Apart from add-on covers, you can also get loans on your insurance policy and request partial withdrawals with life insurance plans.

Surrendering the policy

Surrendering a term insurance policy is simple. As soon as you stop paying the premium, the policy lapses.

If you want to receive maturity benefits, then you need to complete the term of the policy. If you decide to withdraw earlier, then the insurer might make deductions before transferring the maturity benefits


Should You Opt for Term Insurance & Life Insurance?


If you are looking for a pure life insurance plan, then a basic term insurance plan is a good option as it offers a sum assured at an affordable premium. However, if you are looking for a more comprehensive cover and/or wealth generation along with protection, then you can look at the range of life insurance plans.

 

Today, most insurers offer online life insurance policy purchases that allow you to judge providers and plans before signing the dotted line. You can choose from the wide range of Tata AIA life insurance plans based on your needs.

Conclusion
 

Term insurance and life insurance plans offer death benefits in the event of the death of the policyholder. However, most life insurance plans are designed to offer wealth creation opportunities too. While term plans are usually pure-insurance plans, some providers offer riders# to help boost coverage too. Before you buy a life insurance product, make sure that you understand your requirements and the features and benefits of different types of plans.
 


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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and does not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
  • IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
  • Past performance is not indicative of future performance.
  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
  • Please make your own independent decision after consulting your financial or other professional advisor.