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Why Buying a Term Plan Is Smarter Than Traditional Life Insurance Products

If you are unsure if you should buy a term plan or a traditional policy, it is better to buy a term insurance plan in terms of risk coverage. Click here to know more about it.

  • Jul 06, 2022
  • 1,768 Views
Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

​Why Buying a Term Plan Is Smarter Than Traditional Life Insurance Products?

With the burgeoning need for insurance protection and the growing awareness among the people, plenty of innovative insurance products are available in the market today. However, to get the most out of your insurance policy, choosing the right type of insurance cover is mandatory.

While choosing the best insurance policy, you must consider factors like the number of dependents you have, age, the coverage amount required, tenure of protection, etc. So, it is vital to do a bit of research before making the final choice. While most people prefer buying a term insurance policy, others purchase a traditional life insurance policy

If you are unsure if you should buy a term plan or a traditional policy, let us compare the term insurance feature with traditional life insurance policies to know if purchasing a term plan is a smarter choice.

Death benefits payout

Term insurance has very straightforward death benefit payout terms. In the event of your demise during the policy period, your family receives the sum assured. The amount is usually much higher than the benefits offered by other traditional life insurance policies. However, if you outlive the policy tenure, you don’t get maturity or survival benefit.

In the case of traditional policies, the beneficiary may get the death benefit and the accrued interest on the investments. However, the total payout amount is generally small, and it may not be enough to take care of the family’s future expenses, particularly if you have liabilities or debts.

Savings and Coverage offered

In terms of risk coverage, it is better to buy a term insurance plan. Since the term plan only provides coverage against death and there is no maturity benefit, you get a higher coverage at a lower premium.

On the other hand, the traditional policies provide you with death coverage and allow you to invest. A part of the premium you pay goes into investment, and the rest is used to provide death coverage. However, experts recommend that such policies are neither a good investment nor good insurance.

Flexibility

A term insurance policy gives you higher flexibility than the traditional life insurance policies in terms of surrendering the plan. If you want to surrender your term plan, you need to stop the premium payment, and the policy will automatically terminate.

Also, a term policy is highly flexible when it comes to renewability. You can easily renew the plan and convert it to any other endowment policy by paying the adjusted premium. However, the traditional policies are not so flexible. You cannot convert an endowment plan into a term plan.

Premium amount

One of the significant reasons why many people buy a term plan online is that it has the most affordable premium amongst all the life insurance policies available in the market. Since a term plan is a pure protection plan, the entire premium is allocated towards providing life cover, and therefore the premium is the lowest.

In traditional life insurance policies, a part of the premium is invested in various funds, and therefore the premiums are higher. So, if you are looking for an affordable life cover, a term policy is always a smarter choice.

Final Word

Now that you are aware of the various benefits of term insurance over other traditional policies, it is better to buy a term plan and secure your family future. It gives you high coverage at an affordable premium

Kotak e-Term

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Features

  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
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  • Free Medical Check Up every 5th year**

Ref. No. KLI/22-23/E-BB/2435

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- A Consumer Education Initiative series by Kotak Life