Term Insurance vs Traditional Insurance: Which should you Buy?

Written by : Knowledge Centre Team

2021-02-28

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Insurance plays a crucial role in our lives. Life insurance is a very important investment that everyone who is earning should purchase. The covid-19 pandemic has shown us that it is high time that life insurance should be considered as an essential thing and not be treated as a choice.

Over the years life insurance policies have only improved. Now it not only offers life coverage and financial security to your loved ones. These Life insurance policies can now be used as a tool to grow your wealth, achieve the goals of both your family and yourself, secure your retirement, etc.

Apart from constantly evolving, these policies come at a very affordable rate as well. Thus, the new term insurance policies make it easier for more people to secure their families financially.

There are multiple options available in the insurance market, each with their own USP. You should know about these policies so that you do not get confused and can make an informed decision when you decide to buy.

Also Read - Term Insurance Vs Endowment Plan

Term Insurance Plan vs Traditional Insurance Plan

Both these life insurance plans involve payment of a death benefit to your family at the time of your death. But there are differences as well. Let’s take a look at them.

BASIS	TERM INSURANCE	TRADITIONAL INSURANCE
DURATION	This is a type of life insurance that offers to cover you for a specific term. The range is from 5-30 years	These plans offer coverage for a longer duration. Some policies offer coverage up to 100 years as well
OBJECTIVE	The objective is to provide financial security to your dependents	Apart from financial security, this plan aims to build a sufficient corpus to achieve your family’s goals
CASH VALUE	These policies do not have a cash value	These policies do build a cash value
PREMIUM PAYMENT	Premiums are affordable	Premiums are higher when compared to term insurance
DEATH BENEFIT	Death Benefit is payable at the time of your death. No benefit is given in case you survive the term	The death benefit is given to your family at the time of your death. There are other benefits available if you survive during the policy.
MATURITY BENEFIT	No maturity benefit is available. However, some plans may offer to return your premiums.	Traditional plans offer maturity or survival benefit. This can be your fund value and/or other bonuses.
TAX BENEFITS	Tax deductions available u/s 80C and 10(10)D	Tax deductions are available u/s 80C and 10(10)D

When to Buy a Term Insurance Policy?

Term insurance is the most affordable type of life insurance available on the market. The term insurance plan offers coverage for your life for a specific duration, known as the term of the policy. This is done in exchange for regular payments to the insurance companies (premium).

A term insurance policy will provide your family with an agreed-upon sum assured if you die during the term period. No matter what investments you have made, you should have a term plan for yourself.

Things to Check while Buying a Term Insurance Plan

There is no perfect age at which you should decide to purchase a term plan. Currently, the term plan age eligibility is only 18 years old. It is also advised that you buy a term insurance plan as soon as you start earning.

This is because the premiums are lower at a young age. Buying term insurance at an early age will give you peace of mind and will also help lower the burden on your parents if you have taken a loan.

This will also help you develop the habit of saving from a young age. This helps in building discipline.

Why do you Need a Traditional Insurance Plan?

Though term insurance is a very good option to ensure that your family stays financially secure even after your death, it too is at an affordable price.

Financial security, though one of the biggest, may not be your only concern. There are other goals to achieve as well. For this, you may need to buy traditional insurance.

Traditional life insurance, apart from providing financial cover, can also be offered to achieve the following goals.

1. Wealth Preservation

Traditional life insurance policies can help you preserve as well as create wealth. These plans require you to pay premiums regularly or all at once as per your needs. These plans offer you a maturity or survival benefit as well. This is built from the amount you constantly invest in your plan. Thus, it helps preserve your money.

2. Safe Investment

Traditional investment policies have an investment component as well. Thus, it not only offers to cover your risk but also invests your money. Your money is invested in safe income securities such as government bonds, and other fixed-income securities.

3. To Achieve Goals

Life insurance policies such as money back policies or ULIPs are designed in such a way that they help you achieve your long-term goals. The money you invest helps you build a solid corpus. With this corpus, you can help achieve major financial goals such as buying a house, car, ensuring a good education for a child, etc.

Plans from Canara HSBC Life Insurance

We hope that now you are clear about both these plans and whether these are suitable or not. Canara HSBC Life Insurance company offers both term and traditional plans to suit your decision.

Term Insurance Plans

iSelect Smart360 Term Plan

This term plan can cover you for 5-40 years. You can add your spouse to the same policy as well as increase your cover without changing the policy. The plan offers terminal illness cover by default with the life cover and additional riders for the child’s goals.

Traditional Life Insurance Plans

1. Guaranteed Savings Plan

This plan offers life coverage as well and will give you a guaranteed sum as a maturity benefit. You are given the full flexibility to choose your premium payment term and mode. With this plan, you can save regularly and create a huge corpus added with the policies bonus.

Know more about Guaranteed Savings Plan.

2. Invest 4G

This is a ULIP plan that offers to protect your life as well as allows you to invest in the market. In this plan, you can choose where to invest and how much. Also, 4 different strategies manage the fund on your behalf. Your fund value is given as a maturity benefit.

Online traditional life insurance plans from Canara HSBC Life Insurance can help you invest in your goals conveniently. Similarly, very flexible and featureful term plans help you safeguard your family’s future adequately.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.