Term Insurance vs Life Insurance: Which is Right for You?

Term Insurance vs Life Insurance

Every responsible person will at least have one insurance between term insurance vs life insurance. Even if you perfectly plan every stage of your life, there are still some uncertain situations that can arise. Tackling them can be very difficult but having financial support during that time will be of great help.

What to choose in term insurance vs life insurance is a very common confusion. Both of them are helpful, however, your budget and area of concern will be the deciding factors. Both plans have some specific benefits that you need to understand. After reading this article, you will be able to select the most appropriate option for your goals.

Read More: Difference Between Dividend and Growth Mutual Funds

What is term insurance?

Term insurance is a type of plan that is available for a fixed period. A specific number of years is set during which the assured amount of the term insurance will be given. The person who buys the term insurance is insured for those years only. If the person insured unfortunately dies during that period, the assured amount will be given to the nominee by the insurance company. On the other hand, if the insured person is alive and healthy after the term plan is over, no claim can be made. This plan does not allow any maturity benefits after the term insurance period is over.

Alon with the basic term insurance plan, some companies cover additional riders like accidental death cover, critical illness cover, etc. Furthermore, there are three types of term insurance plans.

  1. One-time premium payment term plan – In this plan, the premium amount is paid as a lump sum. The whole amount is paid at one-time.
  2. Partial premium payment term plan – Here, the premium amount is given in partial parts and not all at once.
  3. Regular premium payment term plan This plan is convenient because the amount is required to pay in regular intervals.

Read More: Gold Mutual Funds vs Gold ETF

Term Insurance vs Life Insurance, What is term insurance, What is life insurance

What is life insurance?

Whole life insurance is the policy for the complete life of an insured person but there can be some life insurance plans that offer limited coverage. The assured amount is given to the nominee after the policyholder’s demise but there are other cash-value benefits too. However, with a death benefit, other benefits like savings component and cash for reinvestment are also provided.

You pay the premium amount to the company on a regular period. The life insurance plan keeps on going till the policyholder keeps on making the premium payment. The different life insurance plans are –

  1. Money-back Plans – These plans give dual benefits as it is an insurance plus investment plans. They offer guaranteed returns.
  2. Unit Linked Insurance Plans – In the short form known as ULIPs, these plans are fixed for five years and offer benefits of insurance coverage and investment. They give tax benefits and several fund options for investment.
  3. Endowment Plans – These plans offer assured payouts in two forms i.e. – one, where additional bonuses are paid and the other, in which additional bonuses are not paid.
  4. Whole Life Plans – These plans are endowment plans but with 100 years of the term. This plan assures the payment of the premium amount to the nominee after the absence of the policyholder.

Read More: Is Demat Account Required for Mutual Funds?

Term insurance vs Life insurance

The answer to term insurance vs life insurance confusion is very crucial because it ensures the financial stability of your family in your absence. All the parameters must be considered before selecting any of the plans. The difference between both plans is represented below in an easy tabular format.

Basics Term Insurance Life Insurance
Policy Coverage The term insurance provides death benefits to the nominee of the insured person. In life insurance, the death benefits as well as the maturity benefits are assured to the insured person.
Premium amount This insurance plan is economical and very affordable but offers high coverage. The premium of this plan is higher for the higher coverage.
Maturity Benefits The basic term insurance plan does not give maturity benefits but there is a return on the premium option. Upon surviving the policy term, the company pays back the premiums of the policy to the insured person in this option. The life insurance plan usually covers the maturity benefits along with the death benefits.
Term Duration The term duration ranges from 10 years to 35 years. The coverage period is from 5 years to 30 years. However, the whole life insurance covers up to 100 years.
Flexibility Apart from the basic coverage, the term insurance covers add-ons like the return of premiums cover, income return benefit, accidental death benefits, critical illness cover, etc. The life insurance plans are quite flexible as you can take a loan against the plan, do partial withdrawals, and pay additional premiums for more benefits.
Savings On surviving the term period, an insured person gets no benefits. In this plan, you have the option to invest and upgrade your wealth.
Discontinuation of Policy If you stop paying the premiums, the policy will automatically stop and lapse. You need to complete the premiums of the policy to get the maturity benefits. No savings will be given.

There is a chance of return of premiums but only after deducting a certain amount.

Renewal of policy The term insurance plan can be renewed and also be converted into an endowment plan. The life insurance plan can be renewed only when the policy matures.
Tax Benefit A tax deduction is claimable on policy premiums. The death benefits are without the tax and under critical illness coverage, you can get additional deductions. In this plan too, policy premiums can be claimed for a tax deduction. The death benefits and maturity benefits are tax-free too.


In term insurance vs life insurance, both the plans have pros and cons but you must opt for the plan that is relevant to your goals. The plan that you chose must fulfill your motto and should have the basic coverage i.e., the death benefits of the insured person to their family members.

We hope you like this detailed article about Term Insurance Vs Life Insurance. If you still have some doubts then you can contact us for expert advice.

Click here to contact us.

Team R Wealth

Team R Wealth

Related Posts

Leave A Reply

Your email address will not be published. Required fields are marked *