Life insurance penetration in India increased to 3.2% in December 2021 from 2.8% in December 2019 and became close to the global average of 3.3%. Thereafter, it ranked 10th in the global market for life insurance. This shows the growing awareness of people to get protection against uncertainties in life, especially after the world witnessed the COVID-19 pandemic.
An unfortunate demise of the breadwinner of a family can cause financial and mental stress to the other members. Then it can become difficult for them to maintain a good lifestyle. Therefore, as the breadwinner, you should take a step now to financially cover the future of your loved ones that can help them in times of emergency. Life insurance helps you do just that and also acts as a major tax-saving tool.
The two main types of life insurance are traditional life insurance and term insurance. The first offers maturity benefit together in addition to a death benefit but comes at a higher cost. Term plans offer pure protection through a death benefit to your nominee and are more affordable.
Read on to know the differences between term insurance and traditional life insurance before choosing between them.
A term plan offers a death benefit in the event of your (the policyholder’s) demise during the plan’s tenure. If you outlive the term, the nominee won’t get the death benefit.
With a traditional plan, both death and maturity benefits can be availed. However, the death benefit from term insurance is much higher since it is the only benefit offered.
It is easier to surrender a term policy than a traditional life insurance plan. An insurer provides an option to switch from a term policy to an endowment plan which comes at a higher premium.
With a traditional life plan, you will lose the maturity benefits if you surrender the policy.
Term insurance is among the most affordable categories of life instance. It comes with high coverage at a comparatively lower premium.
But in the case of traditional life insurance, you must pay a high premium to receive more coverage.
Term plan coverage is offered up to a specific age, depending on your financial liabilities, income and other factors. You can enjoy coverage up to 80 years of age.
On the other hand, the tenure of a traditional life policy is longer, often 5-100 years.
Both traditional and term life insurance policies allow tax savings under Sections 10(10)D and 80C of the Income Tax Act, 1961. In both kinds of plans, you can pay the premium annually, half-yearly, quarterly or monthly. Apart from these benefits, you can go for extra coverage by buying riders like a premium waiver, a critical illness rider and more at an additional premium. Life insurance is a significant investment to secure the financial future of your family. Nevertheless, when you pick a plan, remember the above-discussed parameters to make an informed decision. Ensure to choose a reputed insurance company in India that also offers other plans like a pension plan with modern features like a retirement calculator.
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