Term plan is basically designed to provide the needful financial assistance to your family in case of your demise. It will not offer any kind of returns in case you are alive. It is not one of those plans that come out with wealth creation option nor does it carry the savings option.
Whereas a saving insurance plan is designed just to create wealth and secure your money so that you and your loved ones can use the same in the hour of need. But such plans are relatively high as compared to term plan which is available at Rs.500 for 1 crore assured.
Term insurance plan is a pure protection plan whereas savings plans include wealth creation. Savings allows you to save for the future. Term plan offers no such long-term saving options.
Difference between Savings Plan and term insurance plan
The major difference between both the plans is that in saving plan there is a benefit of obtaining returns along with life insurance cover while in term insurance plan your family gets the benefit after your death by claiming the total sum insured without any space for returns arising out of the policy. The saving plan provides scope for wealth creation.
The saving plan is also known as ULIP(Unit Linked Insurance Plan). In a savings plan, you can potentially earn from the investment in equity and debentures as it offers dual benefit of insurance and investment. It gives you the flexibility to move money in various funds, withdraw a fraction of your money and invest an extra sum of money to current savings.
In saving the plan, a part of the premium is deducted to provide life insurance while the rest of the amount is supplied towards investment in equity shares and debentures for the growth of capital. Insured is given a choice of “how to invest premium in different funding options”. For example 100% debt or 100% equity or 50% in both equity and debt.
In term Insurance plan, you can get the benefit of longer coverage amount with lower premium rates. The plan makes the family of the insured financially independent after his/her death. This plan also fulfills the educational needs of children, settlement of loans, payment of bills, monthly grocery expenses, medical expenses etc. One should take term insurance if they wish to financially protect the dependent family members after their death and are the only earning person of the family.
Want to answer this question? You need to login first.