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Life Insurance
Life Insurance vs Term Insurance: Which one should you choose?
We all want to make sure that the financial future of our loved ones remains secured against uncertainties. Life insurance is something many people find useful, but not all types of life insurance products are the same. Term insurance is one kind of life insurance that gives you coverage for a set time. Which term insurance you pick depends on what’s going on in your life and what you need.
Life insurance plays an important role in planning money because it helps you keep your finances safe. If something happens to you while the policy is active, the insurance company gives a certain amount of money to the person you choose. When your insurance lasts for a certain time, it is called term insurance. This term can be as short as 10 years or as long as the time you’re expected to live.
What Is Life Insurance?
Life insurance is a contract between an individual and an insurance company, where the insurer promises to pay a designated sum of money to a beneficiary or beneficiaries upon the insured person’s death. This payment, known as the death benefit, serves as a financial safety net for dependents, helping them maintain their standard of living in the absence of the insured.
There are several types of life insurance policies, including whole life, universal life, and variable life insurance. These policies often come with a cash value component, which accumulates over time and can be accessed by the policyholder during their lifetime. However, this feature typically results in higher premiums compared to term insurance.
What Is Term Insurance?
Term insurance, on the other hand, is a simpler and more straightforward form of life insurance. It provides coverage for a specific period, or term, typically ranging from 10 to 30 years. If the insured individual passes away during the term of the policy, the insurer pays out the death benefit to the designated beneficiaries. Unlike whole life or universal life insurance, term insurance does not accumulate cash value and is purely designed to provide financial protection for a predetermined period.
Key Differences
Which One Should You Choose?
The decision between life insurance and term insurance ultimately depends on individual circumstances, financial goals, and risk tolerance. Here are some considerations to help guide your decision:
Adhil Shetty, CEO, Bankbazaar.com, says, “While both life insurance and term insurance serve the overarching purpose of providing financial protection for loved ones, they differ significantly in terms of duration, premiums, and features. Understanding these differences is essential for selecting the most appropriate insurance solution based on your unique circumstances and financial objectives.”
Whether you opt for the lifelong coverage of permanent life insurance or the affordability of term insurance, ensuring adequate protection for your family is important. That is why you must evaluate your circumstances and take decisions accordingly.
Source : Financial Express