What is the Difference Between Life Insurance & Term Insurance?

Understanding the difference between term insurance and life insurance is crucial when choosing the right coverage for your needs. By knowing the key distinctions, you can make informed decisions based on your financial goals, budget, and long-term needs. This can ensure the right balance of protection and investment for your family’s future.read more

Written ByAashima MongiaContent Writer (Expertise: Term Life Insurance & Investment)

Reviewed ByAtul KathuriaBusiness Head – Term & Investment | Policybazaar.ae

Last updated on 23 August 2026Editorial Standards

Term Insurance vs Life Insurance: Key Differences

Let’s now go through the points of difference between insurance and term insurance —

Point of Difference	Term Insurance	Life Insurance
What it is	Pure life protection for a fixed period	Life protection combined with savings or investment features, depending on the plan
Premium cost	Generally more affordable	Generally higher because the policy may include savings, investment, or permanent coverage
Policy tenure	Usually 5–35 years	May be lifelong for whole life or fixed-term for endowment/ULIP plans
Death benefit	Yes, the sum assured is paid to the nominee if the insured dies during the term	Yes, subject to the terms and conditions of the policy
Maturity benefit	Generally no maturity benefit if the insured survives the term	May provide a maturity value depending on the policy
Cash value	No	Available in some whole life, endowment and investment-linked policies
Loan against policy	Generally not available	May be available with eligible policies, subject to policy terms
Surrender value	Usually not applicable	May be available after meeting the policy's applicable conditions
Flexibility	Simple structure with a fixed coverage period	May offer features such as withdrawals, top-ups or fund switching, depending on the product
Investment returns	No investment component	May offer guaranteed benefits or market-linked returns, depending on the plan
Sharia-compliant options	Takaful term plans may be available	Takaful savings/investment options may also be available
Best suited for	Family protection, income replacement and debt protection	Long-term savings, wealth accumulation and legacy planning, depending on the product

What is Term Insurance and Life Insurance?

Before we get into the difference between the two types of insurance plans, it is important to understand “Is term insurance same as life insurance?”.

Term Insurance Plan

Term insurance is a type of life insurance. It provides coverage for a fixed period (term), usually ranging from 5 to 35 years. If the policyholder dies during this term, the insurer pays the sum assured to the nominee. The sum assured for this plan is usually higher than that of other types of life plans.

Key Points

Affordable premiums
High coverage amount
No maturity or cash value in most plans
Ideal for pure life protection

Life Insurance Plan

A life insurance policy, on the other hand, is an umbrella term that also includes term plans. It offers a financial cushion to the life assured’s family in case of their demise. Several types of life plans long-term coverage along with a savings or investment component. These plans not only provide a death benefit but may also pay a maturity benefit if you survive the policy term.

Key Points

Higher premiums compared to term life plans
Coverage can last until maturity or whole life (up to 100 years in some cases)
Includes savings or investment benefits
Can be used for long-term financial planning

Buy Best Life Insurance Plan in UAE

Some of the best Term Insurance quotes in UAE & Dubai are:

Policy Term

Age

Cover

Payment Frequency

YearlyMonthly

98.1% Claim Settlement Ratio

Term Life Protect

Life Cover (AED)1,000,000

Policy Term (Years)10

Passive War Cover
Pre Existing Disease Coverage
Medical Checkup Not Required
Worldwide Coverage

95% Claim Settlement Ratio

Term Life

Life Cover (AED)1,000,000

Policy Term (Years)10

Worldwide Coverage
Life Cover
Entry Age

98% Claim Settlement Ratio

International Term Assurance

Life Cover (AED)1,000,000

Policy Term (Years)10

Passive War Cover
Pre Existing Disease Coverage: Subject to Approval*
Medical Checkup Not Required
Worldwide Coverage
Critical Illness Cover

98% Claim Settlement Ratio

Live Life Now

Life Cover (AED)1,000,000

Policy Term (Years)10

Worldwide Coverage

98% Claim Settlement Ratio

Critical Illness Protection

Life Cover (AED)1,000,000

Policy Term (Years)10

Worldwide Coverage
Cancer Cover

Detailed Comparison – Term Life Insurance vs Life Insurance

1. Premiums

Term plans have much lower premiums for the same sum assured
Life insurance premiums are higher as they include an investment or savings component

2. Maturity Benefit

Term plans generally don’t pay anything if you survive the policy term
Life plans usually pay a maturity amount, often with bonuses or guaranteed additions

3. Bonus and Add-ons

Life plans may offer bonuses, loyalty additions, or guaranteed returns
Term life policies generally do not provide such additions

4. Surrender Value

Term plans have no surrender value
Life insurance policies acquire a paid-up or surrender value after a few years of premium payment

5. Flexibility

Life plans allow more customisation, withdrawals, and loans against the policy
Term coverage is straightforward with no cash value or withdrawal option

Term Insurance vs Life Insurance: Which is Better?

Understanding the difference between term insurance and life insurance is the first step in making an informed decision.

1. What’s your main reason for buying life insurance?

If your goal is financial protection for your family in case of death, illness, or disability, go for a term plan. It offers high coverage at a low cost.
If you also want long-term savings or retirement income, or simply want to leave a legacy, consider endowment plans, whole life plans, or retirement plans. They combine protection with savings/investments.

2. Do you prefer affordable premiums with high coverage?

A term plan gives you a large life cover for a very affordable premium. This is perfect for strong protection without straining your budget.
If you want lifelong coverage (up to 99–100 years) and are okay with a higher premium, a whole life plan could be a better choice.

3. Do you already have an investment portfolio?

If you’ve already built a diversified portfolio, a term plan adds pure life cover without overlapping with your investments. This keeps your loved ones stay financially secure.

How to Choose Between Term Insurance and Life Insurance?

Evaluate your financial goals and liabilities like education expenses, income replacement, outstanding debts, and more.
Find out how much coverage you need and how long it should last based on your financial goals and responsibilities.
Check your budget to ensure you can easily afford the premiums.
Think about how whole life insurance fits into your long-term savings and investment plans.
Seek advice from a reliable insurance advisor or financial planner to make the right choice.

Frequently Asked Questions

Term insurance is a type of life coverage. It offers pure life cover for a fixed period without maturity benefits. Other life insurance plans, like whole life or endowment, also include savings or investment components.

Term life cover is simpler and more affordable, although it expires without cash value. Whole life is costlier, offers lifelong coverage, and builds cash value over time. The choice depends on your needs and budget.

No. Pure term plans have no maturity benefits. If you outlive the term, you won’t receive any payout.

No cash value, limited-term coverage, higher premiums with age, and no payout if you survive the term are key drawbacks.

No, you don’t get the ‘return of premium’ option with most term life plans in the UAE.

It’s best to buy term insurance early. Buying young means lower premiums and easier approvals, as age and health greatly impact costs.

Yes, you can hold multiple plans. You can combine different term policies for high cover with other life plans for savings or investment benefits.

It depends on your goals. Term plans suit pure protection needs. ULIPs, endowment, or money-back plans may suit those seeking savings, investments, or retirement benefits.

You may be ineligible if you fall outside the insurer’s age range, fail medical tests, or lack required documents like ID or proof of citizenship.

No. Term insurance is actually the simplest and most affordable type of life insurance. Life insurance is an umbrella term that covers whole life, ULIP, endowment, and Takaful plans. So, when comparing term insurance vs life insurance, you are comparing a pure risk protection policy with an option that may include savings or investment with life cover.

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