Term Plan vs. Comprehensive Life Insurance Plans: What You Should Know
Fund investments and insurance policies are two very common types of savings options for individuals in our country. And with a wide variety of insurance policies available in the market today, it’s often confusing for an aspiring investor to choose the right one for their future financial health.
However, most of them have the primary concern of securing their family’s future with a comprehensive plan so that the coverage can help them cope monetarily in case of accidental deaths or accidents.
This article will compare two of the most famous insurance plans in India; a term policy and a comprehensive life insurance policy.
Term Plans and Its Features
A term policy is the most straightforward way of insuring yourself in India. It serves as financial security for the beneficiaries of the policyholders in case of the latter’s accidental demise. Ideally, the term plans provide death benefits to the nominees if the policyholder dies during the term plan tenure. However, they do not have any maturity/survival benefits associated.
A few salient features of a term policy are as below:
- Some term plans also have maturity benefits along with death benefits. However, the policyholder must opt for the return of premium coverage under the plan. This will ensure that the insurer pays back the premium amount if the policyholder survives the maturity period of the term plan.
- Term policies are quite inexpensive and suitable for every individual, even with a low monthly income.
- You can enhance the coverage offered by term plans with term insurance riders.
- The premiums paid for a term policy can provide the policyholders with tax benefits under the Income Tax Act, Section 80C.
Comprehensive Life Insurance Plans and Its Features
A comprehensive life insurance plan provides an investment component to the policyholder in addition to the coverage amount. A portion of the policyholder’s premiums is invested in the share market, and the rest is used to fund the life insurance coverage.
A few salient features of a comprehensive life insurance policy are as below:
- With such investments, the policyholder can get life coverage and wealth creation in the share market under one policy.
- The insured are eligible to decide whether they wish to invest in equity-related funds, debt funds or a mixture of both.
- These investment plans will also allow the policyholder to switch funds to achieve greater returns.
- The comprehensive life insurance policies do not come with high fees. The annual charges for such policies are between 2-2.5% as per the IRDAI.
- For the investors, it is advisable to go for long-term life insurance policies for better returns.
- Some comprehensive life insurance plans offered by leading insurers like TATA AIA life insurance policies offer in-built critical illness and comprehensive health riders to ensure all-round protection to you and your loved ones.
Which Should I Opt for?
A term plan is a necessary instrument in every individual’s financial portfolio. As it offers extensive coverage at extremely affordable premiums, term insurance policies help you guarantee financial security for your loved ones in case of your untimely demise. Moreover, you can further enhance term plan coverage with riders to ensure coverage against specific circumstances.
A comprehensive plan is a perfect option for someone looking at a combination of life insurance, in-built riders and market-linked returns in the same plan. You get life cover (financial protection for family), market-linked returns (wealth creation) and important riders (enhanced, all-round coverage), all within a single policy.
Both term policy and comprehensive life insurance policy have their benefits. So, before choosing one, you need to do a good amount of research about both to avail the best policy for yourself and your family. Also, do keep in mind your financial conditions and your future monetary goals while selecting an insurance plan for yourself.