Term Insurance Vs Traditional Life Insurance

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

  • Icon for Kotak Preferred e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan provides a high level of protection to your loved ones in your absence.

  • Kotak E-Invest Plan

    Kotak e-Invest plan is a complete Unit-Linked Insurance Plan that can be customized as per your goals and needs.

  • Icon for Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and provides an insurance cover against any eventuality.

  • Icon for Kotak Preferred e-Term Plan

    Kotak Lifetime Income Plan

    Kotak Lifetime Income Plan gives you the security of your income continuing thru your life and in your absence throughout your spouse's lifetime!

  • Icon for Kotak Preferred e-Term Plan

    Kotak Health Shield

    Kotak Health Shield Plan helps secure your finances in sudden medical expenses such as Cardiac, Liver, Neuro, and Cancer (all early and significant illness stages/conditions of cancer), along with offering protection for personal accidents - in case of accidental death or disability.


Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.


What Should One Consider Buying: Term Insurance or Traditional Life Insurance

Term Insurance Quote
  • 23rd Jul 2019
  • 3,974

What Should One Consider Buying: Term Insurance or Traditional Life Insurance

There are different types of life insurance policies. You may choose traditional life insurance plans that provide life cover along with maturity benefits. Another option is a term plan, which is a pure life cover and provides only death benefits in case the policyholder passes away during the policy duration.

While choosing between traditional life insurance and term policies, you need to consider some parameters that are listed below.

1. Death benefit

This is one of the biggest differences between term insurance vs. life insurance policies. Term plans offer death benefits if an unfortunate incident takes place during the policy term. Traditional insurance plans offer death and maturity benefits. However, the death benefits available are much higher in term plans when compared to traditional life plans.

2. Risk covered vs. savings

The premium payable on term plans is lower. This allows you to procure a higher sum assured. However, the benefits are paid to your beneficiaries only if something untoward happens to you during the policy period. In comparison, traditional life insurance policies also include maturity benefits along with death benefits. Therefore, you may use these plans to meet future financial goals along with ensuring the financial security of your loved ones. However, if you are looking for a plan that offers a higher sum assured at an affordable premium, a term plan is ideal for you.

3. Flexibility

Term insurance plans are easier to surrender; you may simply discontinue the premium payment and allow the policy to lapse. Additionally, insurance companies may provide you with the option to convert the term plan into an endowment policy offering the same coverage at a higher premium. On the other hand, if you do not pay the premium on your conventional life insurance policies, you lose the policy benefits. If you surrender the policy before the end of the term, you lose the maturity benefits. The insurer will pay only the total premium paid after certain deductions.

4. Premium amount

To procure higher coverage under a traditional life cover, you need to pay a greater premium. Therefore, it is likely that you may have financial limitations due to which you may invest in a lower life cover. Additionally, the returns on traditional life plans are low; the sum assured reduces if you surrender your policy before its maturity. The returns are also affected by the policy administration charges. Compared to all these limitations, term plans are more affordable and enable you to procure higher coverage at a more affordable premium.

5. Tax benefit

Some individuals think that because they pay a higher premium for traditional plans, they are able to benefit from higher tax deductions under section 80C of the Income Tax Act, 1961. Additionally, some even think that the maturity benefits are tax-free. However, the maximum limit under section 80C remains the same for both term insurance and traditional life insurance irrespective of the premium amount.

Life insurance is crucial in your overall financial portfolio. Including a term plan and a traditional plan is advisable. A term plan allows you to secure the financial future of your loved ones when you are not around. A traditional life cover helps you to meet your life goals if you outlive the policy period. Consider the aforementioned points and make an informed decision.

- A Consumer Education Initiative series by Kotak Life

Also read

    • 16th Nov 2021
    • 304

    Who Is A Nominee In A Life Insurance Plan?

    A nominee is a person who is eligible to collect the death benefit from the insurance firm after the policyholder’s death. Here's some points to hel...

    Read more
  • How Much Life Insurance Costs and How Much Insurance Cover You Need?

    Explore the financial aspects of life insurance

    Read more
  • Key Things to Review in Your Life Insurance Policy Document

    A life insurance contract includes multiple clauses. At the time of life insurance policy review, it is important to check all details thoroughly. Her...

    Read more

Related Plans

  • Kotak Premier Life Plan

    Kotak Premier Life Plan

    Kotak Premier Life Plan is a limited premium paying participating whole life plan, where you can choose to receive bonus payouts even after premium pa...

    Know more
  • Kotak Term Plan

    Kotak Term Plan

    The Kotak Term Plan is a pure risk cover plan and an economical way of providing an adequate level of financial protection.

    Know more
  • Kotak e-Term Plan

    Kotak e-Term Plan

    Get protected at less than Rs.19/day with Kotak e-Term Plan. Our term insurance plan combines best-in-class features & comprehensive coverage with...

    Know more
  • Kotak e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan is a pure term insurance plan that provides a holistic life protection at affordable prices. Find out the eligibility criteria, key ...

    Know more
  • Kotak SmartLife Plan

    Kotak SmartLife Plan

    A Limited Pay Non-Linked Participating Life Insurance plan. You earn and work hard to accomplish your dreams and aspirations at every stage of life.

    Know more