The Long Read
Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)
No, they are not the same thing.
Even though people use 'life insurance and 'term insurance' interchangeably, most of them do not understand that they are completely different products.
To get the best financial cover for your family, you need to know the difference between the two. Let’s see how they are different:
It is as a pure protection plan
It only provides a life cover when the life assured (aka you in this case) passes away during the policy duration
It has no maturity benefits i.e. if you outlive the policy duration, you don’t get any investment returns. (Another reason, to stop calling term insurance an ‘investment’, because it’s clearly not)
It provides both life cover and investment returns
If you don’t die, you will get the maturity amount. And if you die, your family will get the life cover and the maturity amount
The life cover amount is typically lesser than that in term insurance
Let’s understand with an example:
Say you have a term insurance policy and a non-term insurance policy. You pay a premium amount of INR 10,000/-* per annum for each of them.
The term policy will give you a life cover of INR 1 cr* while the non-term policy will fetch you a life cover of INR 1 lakh* but most of your premium will be invested and will be paid with returns as maturity benefit.
(*The premium and life cover amounts are indicative and depend on age, lifestyle, health status and other factors)
Now you see, life and term insurance are completely different. Now you can assess your needs and can understand which insurance plan is best suited to them.
Yes, of course! Your father got a term plan to secure your and your family’s financial future. After him, it may be your turn to be responsible for your family’s financial security.
If you have family members such as your mother, siblings or grandparents who are financially dependent on you, you should buy term insurance so that they can stay financially secure even if you’re no more.
Your dad has set a good example by being responsible and getting a term plan. You too should learn from him and get a term plan to do your bit for your family’s financial security.