Life insurance Vs Term insurance: Which One Should I Choose?

Life insurance Vs Term insurance: Which One Should I Choose?PolicybazaarAverage Rating / 5 ( reviews)
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Life is all about the happy moments that we enjoy with our family members. But sometimes these happy moments can be disrupted with an unfortunate event such as premature death, leaving your loved ones high & dry. That is why, it is very important to opt for life insurance to protect the future of your family members who are financially dependent on you. By investing in a life Insurance in Dubai, you are protecting your loved ones tomorrow. It compensates against the monetary loss that is suffered in an event of untimely demise.

Moreover, life insurance plans in the UAE assist in meeting your various life goals effectively. For example, there is a child insurance plan that enables you to create a secure financial corpus for your children. Just like that, there are pension plans that help you to create a retirement fund and ensure lifelong incomes. Therefore, life insurance policies find a place in every aspect of your life and offer you and your family much-needed financial protection.

Well, life Insurance in Dubai comes in several variants which consist of different types of life insurance policies. Along with all these variants, term life insurance is often compared with other types of life insurance plans. Is a term plan similar to other life insurance policies?

No, it is not.

Though the term insurance plan is a part of a life insurance policy, it differs from other types of life insurance policies in many aspects. So, let’s understand the key difference between term insurance and traditional life insurance in detail.

What is Term Insurance Plan?

A term insurance plan is the most basic type of life insurance policy that covers the risk of premature death. In an event of premature death of the policyholder during the policy term, the term plan promises to pay a sum assured as a death benefit to the beneficiary(s) or family members. Term plans offer higher coverage at affordable premiums enabling you to avail a higher sum assured which would be enough to fulfill your loved one’s various financial needs in your absence.

What are Other Life Insurance Policies?

As said earlier, the term plan is a type of life insurance plan. Apart from the term plan, there are also many other variants of life insurance in Dubai and they are as follows:

  • Child Plans
  • Whole Life Insurance Plans
  • Retirement Plans
  • Money-back plans
  • Unit-Linked Insurance Plans
  • Endowment Assurance Plans

Difference between the Term Insurance Plan & Traditional Life Insurance

Now you must have understood the basic meaning of both these insurance plans. Let’s understand the key difference between a term insurance plan and traditional life insurance plans. The significant differences between these two policies can be outlined in the following manner:

  • Coverage: Term insurance plan offers coverage against death only. Under most term insurance policies, the sum assured is paid by the insurance company to the family members only if the policyholder dies during the term of the policy. However, other type of life insurance plans has maturity benefits. While all other life insurance policies cover the risk of premature death, they also offer sum assured if the policyholder outlives the policy term. Therefore, in terms of coverage, term insurance plan and traditional life insurance are quite different from each other.
  • Variants: Term plans are divided into the 4 variants and they are as follows:

Variant’s Name

Meaning

Level Term Plan

Term insurance plan where the sum assured does not change during the policy tenure.

Increasing Term Plan

Term insurance plan where the sum assured get increased throughout the policy term.

Decreasing Term Plan

Term insurance plan where the sum assured get decreased throughout the policy term.

Return of Premium Term Insurance Plan

Term insurance plan where the insurance premiums paid throughout the policy term are refunded back if the policyholder survives until the maturity date of the plan.

Henceforth, term insurance plans are divided into 4 variants based on the coverage they offer. However, the main objective of all 4 variants remains the same which is to offer financial protection. But in the case of traditional life insurance in Dubai, different variants meet different life goals.  For example, endowment plans enable you to create wealth via assured returns while child plans ensure a corpus for your children even in your absence. Money-back insurance plan offers you liquidity while unit-linked insurance plans assist you to gain investment returns. Therefore, you can opt for different life insurance in Dubai as per your different life goals.

  • Premium: Since term plans cover only the risk of untimely death, which is why they have low premiums when compared to other life insurance policies. You can buy a high sum assured at affordable premiums. Whereas, other life insurance policies have a wider scope of coverage since they offer maturity benefits also. Therefore, the premiums are higher than a term insurance plan.
  • Flexibility: Term insurance plans are rigid in the term that they don’t provide survival benefits or don’t have any surrender or paid-up value. While on the other hand, traditional life insurance policies are quite flexible. They also a surrender and paid-up value. In addition to this, you can get policy loans under traditional life insurance in Dubai.
  • Duration of Coverage: Term insurance plans has a long term coverage durations that can go up to 40 years. However, other type of life insurance policies can also be taken for shorter durations since the tenure begins from 5 years and it goes up to 30 years.

Term Insurance Vs Traditional Life Insurance

Key Features

Term Insurance

Life Insurance

Premiums

Cost-effective and affordable. In fact, it is the cheapest type of life insurance policy.

Premiums are quite higher when compared to term insurance.

Coverage

Covers only premature death.

Premature death & maturity benefits are covered until the policy term.

Death Benefit

Under the term plan, death benefits are payable.

Under other life insurance policies, death benefits are payable.

Maturity Benefit

Not payable usually

Payable under the majority of life insurance plans

Flexibility

Not flexible

Very Flexible

Term

Usually ranges from ten years to up to forty years.

Usually ranges from five years to up to thirty years.

To Sum Up

So, assess your financial needs as well as know the advantages and disadvantages of a term plan and traditional life insurance in Dubai. This will help you to make a wise decision on which insurance policy to opt for.

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