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What is the difference between life insurance & term insurance? Which one is better?

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09 Apr, 2021 by  Hersh Rajput

Can you please explain the difference between life and term insurance? Which one is better? How to evaluate? Best companies to buy from?

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Term Life Insurance

2 Answer

12 Apr, 2021
Associate Professor, BIMTECH

Life insurance is a contract between insurance co & policyholder where the insurance co agrees to pay an agreed amount on happeing of the some identified / agreed life related events against a fee / premium. The normal event covered is death / diabikity / even survival till a time & so on. Under this broad definition we hv any types of policies - only protection , protection plus saving & even only savings. Term insurance is that class / type of policy which covers only death. For the other 2 supplementary question I suggest you to read the blogs / earlier posts of Beshak. That would require much more input of higher level

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12 Apr, 2021
CEO, Insurance Samadhan

Dear Mr Rajput

Term insurance is Pure insurance which means money to family on death . In Term insurance there is no money on survival .

All other insurances like Endowment have money to family on death and money to self on survival .

All insurance products are made of three components called MEI

  1. Mortality cost I.e amount paid to cover the risk of death . This is the contribution to the pool .
  2. Expense - this is the management fees to manage the pool .
  3. Investment - this is the contribution for investment pool to be managed by the Insurance company . This amount is given back on survival . In case of term insurance this I is zero .

Ofcourse term is must for everyone who loves family and there is no other option . Other insurance product compete with other saving products like mutual fund , recurring deposit etc .

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