Insurance is part of a good financial plan and with many options available; it can be quite difficult to choose a right one. Life insurance provides financial aid in unforeseen conditions. Of the available insurance plans for coverage of life are Term Insurance and Life Insurance. To make an informed decision, it is important to understand the basics of these insurance plans. Let us understand the essentials of these two plans.

Risk Coverage –

• Term Insurance – It covers the risk of premature death of the policy holder within the duration of the policy. It provides lump sum money to the family.
• Life Insurance – It provides life long cover with saving benefits. This is ideal if you are looking at building a corpus along with a life cover.

Death Benefit –

• Term Insurance – It provides death benefit only on the demise of the policy holder within the term period.
• Life Insurance – It offers both death and maturity benefit to the policy holder.

Maturity Amount –

• Term Insurance – The amount provided a death benefit is considerably higher compared to Life Insurance.
• Life Insurance – The amount provided on maturity when compared to term insurance is lower.

Premium –

• Term Insurance – The premium for a term insurance is very low and comes with a high coverage. This makes it an attractive choice. This would best suit someone who cannot afford to pay high life insurance premium.
• Life Insurance – In Life Insurance, the higher the coverage amount, that much higher is the premium. Due to this, maybe some insurance buyers may not take a policy with the sufficient coverage.

Flexibility –

• Term Insurance – Term Insurance is fairly straight forward, if you don’t want the plan, then you can stop paying the premium and the policy gets terminated.
• Life Insurance – If you want to terminate a policy or pre close it, then you may be charged with surrender charges and you will only get the premium paid so far.

Tax Benefit – Both offer good tax coverage and can avail tax benefit under Section 80C of the Income Tax Act. What one can do is, invest in a Term Plan and use that extra money that can be saved on the premium to invest in Mutual Funds or PPF.

From this we can come to the conclusion that Term Insurance is for someone looking at a specific time for life cover, low premium and flexibility. Whereas Life Insurance is for someone looking to have a life cover along with maturity benefit which can help contribute to a large corpus fund.