Insurance coverage for a person in today’s day is paramount to deal with any uncertainties in life. With the increasing need for insurances, several options are available in the market that may be suitable for your needs. However, choosing the one that is apt for you and your family is challenging.
Factors such as age, time period, dependants and coverage amount needs to be considered before choosing the insurance policy. Also, knowing whether a Term plan or Conventional Life insurance product is better for your family would require proper research. Read on to know the advantages of Term plan over Conventional plans to choose the best for you and your family.
The difference between Term Plan and Conventional Plan is that the Term plan provides with only Death Benefit while other life insurance policies offer with dual benefit of the death benefit and maturity benefit. Although the life insurance policies offer maturity benefit, the amount offered as a death benefit in Term Insurance is too high as compared to life insurance death benefit.
At least having Term Insurance would help your family to live a financially independent life in your absence whereas in the case of life insurance, the amount may not suffice the finances of your family in your absence.
As the Term plan does not provide maturity benefit, the premium paid towards the term plan is lesser than life insurance plans. So those who cannot afford to pay a higher premium but wish to have death benefit for the family can choose Term Plan. However, if you wish to build a corpus, you can invest in traditional life insurance but the returns are low i.e 5% -7%.
There is an additional cost in life insurance plans, such as administrative costs, which makes the returns even lesser. Contrary to this Term Insurance plans are available at a much lower price and is more affordable.
Flexibility of Policy Surrender:
It is easier to surrender a Term insurance plan as compared to Life Insurance plans. In the case of a term plan, as soon the insured stops to pay the premium, the policy ceases to exist. However, the insured can get the maturity benefit only if he pays premium throughout the entire tenure in the case of life insurance policy. If the insured surrenders the life insurance policy, they will not recover the entire savings amount except the premium amount that too after deductions.
Moreover, a Term plan is easily renewable, and the option of converting the policy to endowment plan is also possible.
The premium paid towards the Term plan is minimal and eligible for Tax deduction under Section 80C. However, it is misunderstood that as the premium paid towards Life insurance plans are high so the insured can avail higher tax benefits. Moreover, it is assumed that Maturity amount is also tax -free. So, if a person plans to invest in Term plan to get tax benefits he/she can do so and invest the balance amount in other tax-saving investment such as PPF, ELSS.
Understanding the needs of your family is crucial to select between Life insurance plans and Term plan. Moreover, understanding the perks of both the plans would help you to make an informed decision and choose the plan that best suits you and your family.