Choosing the right insurance plan is an essential financial step that can protect your family in the event of your demise. Two of the most common insurance plans are term and permanent life insurance. While both provide death benefits, there are some critical differences that you need to understand before purchasing a policy. This blog will give a detailed comparison of term and permanent life insurance life insurance to help you make an informed decision.
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Term insurance, also known as term life insurance, provides life coverage for a specified term - usually between 1 and 30 years. It pays the death benefit if the policyholder dies during the coverage term.
Term Insurance is best for temporary life insurance needs or supplementing existing life insurance. It is ideal for mortgage protection, family income replacement, etc.
Permanent life insurance provides coverage that never expires, unlike term plans. These plans offer lifelong protection, with the policy paying out the death benefit whenever the policyholder dies, whether during the early or later years of the policy. Permanent life insurance is ideal for permanent family protection, wealth creation through cash value, and legacy planning.
| Parameter | Term Insurance | Permanent Life Insurance |
| Premium | Lower premium because it only provides temporary protection | Higher premium because coverage is lifelong |
| Duration of Coverage | Coverage is for the policy term - usually 1 to 30 years | Protection lasts for the entire lifetime |
| Cash Value Accumulation | No cash value builds up as the total premium goes towards only providing death coverage | Part of the premium goes towards cash value - the loan can be taken against accumulated cash value later |
| Claim Payment | Only the sum assured is paid on death | Sum assured + vested bonuses and cash value (if any) is paid on death |
| Riders | Riders like accidental death, critical illness, and more can be added at minimal cost | Waiver of premium, accelerated death benefit, accidental death riders, and more are available |
| Surrender Value | There is no surrender value. Nothing will be paid if the policy is discontinued early | After 2-3 years of premium payments, the policy gains surrender value, ensuring a payout if surrendered early |
| Additions | No bonuses or guaranteed additions. Only the sum assured is paid | Bonuses, cash value, etc, lead to increased death coverage over time |
| Eligibility | Few restrictions related to age or income | More eligibility restrictions on maximum coverage amount, income, health history, etc |
Here are some scenarios when permanent life insurance may prove to be a better choice than term insurance:
Life insurance provides lifelong coverage to secure your family's future, compared to term insurance, which covers only a limited period.
Part of the premiums in life insurance go towards building a cash value that grows over time and can be borrowed against in times of need. Term plans do not offer this added advantage.
The cash value accumulated over the years in a life insurance plan can supplement retirement savings and leave a legacy.
Considering lifelong coverage, life insurance is better than term insurance for primary long-term goals like children's education and retirement planning.
Life insurance plans that offer maturity benefits and coverage allow policyholders to enjoy the dual benefits of protection and stable returns.
Here are some scenarios when term life insurance may prove to be a better choice than permanent life insurance:
Suppose you need insurance only for a specific period to cover a home loan or children's education. Term insurance protects for a set period, allowing you to match the length of coverage to your needs.
Term insurance premiums are substantially lower than permanent life insurance premiums, making it more affordable.
Term insurance is much cheaper than permanent insurance, especially if you get it at a young age. It allows you to get high coverage even with low premiums.
Term insurance provides a much higher death benefit for the same premium as permanent life insurance, maximising the protection you can provide.
The ACKO Life Flexi Term Plan offers unmatched flexibility. You can customise your coverage according to your evolving life stage needs, increase or decrease your Sum Assured, and policy tenure to match your financial commitments. This innovative term plan ensures your family's financial safety while not burdening your wallet.
To simplify choosing the right coverage, rely on a Term Insurance Calculator to align your plan with your financial priorities. It helps you find the best life cover based on your long-term goals, responsibilities, and lifestyle.
For example, with the best term insurance plan for 1 crore, you can ensure peace of mind and protect your family from unforeseen events. By comparing rates, coverage options, and premiums, you can select the plan that works best for you. It’s not enough to focus solely on the cost; ensure your family will have adequate financial support in the future. Make an informed choice and pick a term insurance plan with the right life cover that aligns with your financial goals.
Term insurance provides temporary protection for a specified duration at a low cost. In contrast, permanent life insurance ensures lifelong family protection and wealth creation through cash value and a death benefit. So, select the right plan according to your requirements and protect your loved ones today.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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