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Is Term Plan a Life Insurance? - Know the Differences

December 12, 2018

As an informed consumer, it is very important for you to understand the different types of insurance plans in their total perspective. Given the fact that life is very uncertain, insurance becomes essential for securing the future of our loved ones. Therefore, choosing the right type of life insurance plan is very essential for living a stress-free life without having to bother about any financial woes. However, have you often wondered about the difference between a life insurance plan and a term plan? How exactly are these two different?

A term insurance plan is actually a life insurance plan but for a fixed period of time (term). Once a person takes out a term insurance plan, she/he is insured for the term of that plan. In the event of the person's demise within the term of the plan, the main corpus (sum assured) is paid by the insurer to the person's nominee. However, no claim can be made if the person survives the term. Therefore, in a term insurance plan, there are no maturity benefits in case of survival of the term. Even though this may make a term plan seem less favorable, however, it must be kept in mind that a term insurance plan is also the most economical one.

A term insurance plan is of three types - One-time premium payment term plan (in which the premium amount is payable as a one-time lump sum payment), Partial premium payment term plan (premium amount is paid in partial terms) and a regular premium payment term plan (premium amounts are paid in regular, periodic intervals). In addition, some insurers may include a "ROP" (Return of Premium) clause in the policy terms which entitles the subscriber to receive the premiums that she/he has paid during the policy term, after maturity.

 

Buy Term Plans

 

A life insurance plan, on the other hand, entitles the subscriber to a pre-decided and mentioned maturity benefit. Therefore, if the subscriber survives the term, she/he receives specific maturity benefit. In the event of the subscriber's demise during the policy term, the main corpus (sum assured) is paid to the nominee(s). Depending on the mode in which the corpus is built over a period of time, life insurance plans are of several types. These types are -

1. Money Back plans:

In these plans, guaranteed returns are paid and the plans actually serve as a vehicle for both investment and insurance coverage.

2. ULIPs (Unit Linked Insurance Plans):

These plans combine the benefits of investment as well as coverage and come with a lock in period of 5 years. These plans offer tax benefits and are market-linked instruments with varied fund options from among which the subscriber can choose as per her/his own wish.

3. Endowment plans:

These plans offer guaranteed pay outs and come in two formats (with profit, where additional bonuses are paid and without profit, where no bonuses are paid).

4. Whole Life Plans:

These plans can be seen as endowment plans that come with long terms of up to 100 years. The main corpus (sum assured) is payable to the nominee(s) after the demise of the subscriber.

HDFC Life offers various term plans that seek to secure the future of your loved ones and protect your hard-earned finances in the event of an unforeseen occurrence. For details, click on the mentioned link: https://www.hdfclife.com/term-insurance-plans.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.