Simplifying Life Insurance in India
Differences Between Term Insurance and Life Insurance Explained
What Is Term Insurance?
What Is Life Insurance?
Life insurance is also a contract between the policy provider and owner. In this agreement, the insurance company becomes obliged to pay a certain sum assured after the policyholder’s untimely demise or after a predetermined maturity period, whichever comes earlier.
So, in this policy, you get to enjoy the maturity benefit as well as the life cover or death benefit. It helps you ensure financial security for your family and build a corpus at the same time.
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. |
| 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 | Term Plans do not have any savings component and hence no surrender value. | Life Insurance Plans have a savings component and hence have a surrender value depending on the policy tenure completed. |
| 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 like 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 Insurance vs Life Insurance
What is common between the term insurance and life insurance plans?
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.
Tax benefit is one commonality between term insurance and life insurance plan. The premium paid towards your life insurance or term insurance policy is tax exempt under Section 80C. Furthermore, Section 10D makes death and maturity benefits free from tax liabilities. However, these benefits are governed by the prevailing tax laws.
How can I claim death benefits under a term or life insurance plan?
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?
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?
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
Other Important Articles about Term Insurance Features
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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