What is the difference between life insurance & term insurance? Which one is better?
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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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
- Mortality cost I.e amount paid to cover the risk of death . This is the contribution to the pool .
- Expense - this is the management fees to manage the pool .
- 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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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