Confused about what to choose between permanent life insurance and term insurance? Although seeking a deep understanding of the differences can be overwhelming, it is a crucial step as both these options have their set of advantages and unique features. Hence, this guide will walk you through factors to consider when deciding which life insurance type works for you and your family.
Difference Between Permanent Life Insurance and Term Insurance
Here is a table showcasing the difference between permanent life insurance and term insurance plans for you to have an in-depth understanding of both concepts:
Ready for a challenge? Click here to take our quiz and show off your knowledge!
| Parameters | Permanent Life Insurance | Term Life Insurance |
| Coverage | It offers coverage for your whole life. | It offers coverage for the specific term you have selected. |
| Sum Assured | Permanent life insurance plans offer life coverage as well as investment benefits. | The term life insurance plans enable you to receive a higher sum assured by paying affordable premiums, as they do not offer investment benefits. |
| Death Benefits | The insurance company pays the death benefit to your family members after your death. | Your family member will receive the death benefits if you pass away within the policy term. |
| Maturity Benefits | It will offer a lump sum payout after the policy matures. | It does not offer maturity benefits as it provides coverage for a specific period. |
| Flexibility | This plan allows you to change the premium amount, sum assured, and term during the policy period. | Term life insurance is flexible, as it allows you to customise the sum assured and policy tenure and renew the plan for a new term after its expiry. |
How to Choose Between Permanent Life Insurance and Term Insurance?
Choosing the right form of life insurance is significant as it gives you and your loved ones financial security against unforeseen events. Here are the things to be considered while choosing between permanent life insurance and term insurance:
1. Determine Your Insurance Requirements
Before considering the option between different types of insurance, assess what aspects of your life you want to insure. Each type of insurance has a different kind of objective, so make sure that you have a clear understanding of what you want. Furthermore, you can check whether a permanent life or term plan offers coverage for the risks you intend to cover.
Ready for a challenge? Click here to take our quiz and show off your knowledge!
2. Evaluate Your Cost and Budget
Your budget plays a crucial role in dictating the kind of coverage you can afford. Generally, the higher the premium, the more comprehensive the coverage. However, vital considerations are required when balancing the premium you can afford and the coverage you receive.
3. Research the Insurance Company
Now that you know the type of insurance you need, it is time to research the different insurance companies. Look up the company ratings and reviews to get more insight into their customer service, claims handling, and general financial capabilities. Comparing different insurers will enable you to secure the best coverage terms with competitive rates.
4. Check Customisation Option
One of the crucial factors to consider when choosing between permanent life insurance and term insurance is the customisation and flexibility option. You must assess how much you can modify your insurance by including additional riders. In addition, a good insurance plan offers some flexibility in adjusting to your changing needs.
5. Seek Discounts and Combos
Some insurance companies offer discounts if you purchase multiple policies with them or meet specific criteria, such as being a safe driver or a non-smoker. Hence, you must check to see if you can qualify for some discounts that will reduce your overall cost.
6. Read the Fine Print
As life insurance policies contain several inclusions and exclusions, you must go through the policy documents carefully. The policy can be full of complex terms and conditions, and you must know plan exclusions, deductibles, and limits. Moreover, these will avoid any unpleasant surprises while making a claim.
7. Seek Professional Advice
If this process seems overwhelming, speak to an insurance broker or consultant. Everyone’s situation is different, and expert advice from an industry veteran may be beneficial in choosing the right policy for you. They can help you select the best one out of the two according to your desired insurance requirements.
8. Review Your Insurance Requirements Regularly
Your life is changing, and so are your insurance needs. It is advisable to review the policy periodically so that your coverage stays in correlation with your changing needs. It can be annually or at significant points in your life, like marriage, the birth of a child, or the purchase of a new home.
Final Words
Overall, term insurance and permanent life insurance have different objectives and cater to contrasting financial requirements. Hence, deciding between the two can be a daunting task. However, understanding the differences will help you choose the ideal plan according to the insurance requirements and future financial goals.