March 27, 2026

Difference between term insurance And life insurance

Life is uncertain, and we want to ensure our dependents continue living a comfortable life, at least financially, even after our passing. Life insurance is an instrument that helps create a financial corpus that can be useful in the future. Life insurance can broadly be divided into two types - term insurance and life insurance. Are you curious to know the difference between term insurance and life insurance?
Let us first understand what term and life insurance plans are! We will then look at the differences between them.

What is a term insurance plan?

In simple terms, it is pure life insurance. The proposer (policy owner) pays the insurance regularly for a specific term (period). In an unfortunate situation of the proposer’s death, the beneficiary (nominee) gets the financial compensation if the proposer dies while the policy is in force.
Many insurance companies offer plain life insurance, whereas others offer optional riders. For example: accidental death benefit or critical illness coverage.
Different insurance companies offer various term insurance plans with various benefits. A few are listed below. This is, of course, not a comprehensive list.
  • A level term plan offers the term plan with a uniform premium throughout the term.
  • Return on premium plan offers the return of the premium in case the proposer reaches the maximum age limit.
  • A convertible plan offers the facility to convert your term life insurance plan into other insurance plans as deemed by the proposer.

What is a life insurance plan?

This is a plan offering comprehensive life cover and saving components. A life insurance plan offers death cover to the beneficiary in case of the demise of the policyholder. S/he also gets returns on completion of the policy terms, known as maturity benefit.
The premium paid by the proposer is divided into two parts. One part gets allocated to life cover, and the other portion proceeds to savings and investments.
There are multiple types of life insurance plans offered by insurance companies with different and focused benefits. Although the list is long, some of them are listed below:
  • Whole life insurance plan covers the proposer till death along with death benefits to the beneficiary.
  • An endowment plan provides the death benefit to the beneficiary with the market returns based on the policy terms.
  • Unit-linked insurance plans, also referred to as ULIP, offer a combination of death cover and investment benefits.
  • Pension plans offer retirement benefits after a specific age.

What is the difference between life Insurance and term insurance?

Let us understand each one of them in detail.

Death benefit

A term plan provides the benefit only on the demise of the policyholder within the specified term period. The policyholder gets no benefit if death happens after the policy term completes.
Traditional life insurance plans provide benefits in case of death with maturity benefits. Otherwise, the policyholder gets the policy maturity benefit on completion of the term.

Survival benefits and savings

The term insurance plan provides the nominee with a higher death benefit cover. However, no returns are paid if the policyholder survives the term.
Life insurance plans help create a future corpus while providing the death benefit to the nominee. As part of it is invested in the market, you get the returns on maturity.

Tenure

One of the major differences between life insurance and term insurance is the tenure for which it is applicable. Term insurance offers coverage for a fixed period/age of the individual. It can have a fixed term such as 10, 15, or 20 years. One can also get the cover up to the age of 85 years in most cases.
Life insurance can also have a tenure. However, you can choose it for your whole life until you reach the age of 100 years.

Policy surrendering terms

Term policy is deemed to be surrendered or lapsed if you stop paying the premium. The benefits also terminate on policy surrender.
Life insurance benefits can only be claimed after the decided term or maturity completes. If you wish to surrender the policy prematurely, you will only get back the paid premium amount post deduction of some administrative charges.

Premium amount

Although term life insurance offers higher benefits, it has a low cost. This is because no returns are offered at the end of the duration.
Life insurance policies reap higher results if continued for a longer period. Although the death benefit is lower, the market returns can earn a good amount for the policyholder during maturity.

Tax benefit

Both policy premiums are exempted from tax deduction under section 80C of the Income Tax Act.

Conclusion

Both term insurance and life insurance have their exclusive relevance and benefits. Based on the differences mentioned above, one can choose the best plan after exploring various options available in the market. Although the traditional life insurance plan offers returns in the form of maturity and other benefits, it is advised to have at least one term insurance as the cover benefit is much higher than that of a life insurance plan.

Disclaimer

The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.

Never miss a trading opportunity with Margin Trading Facility

Enjoy 2X leverage on over 900+ stocks

Upstox Margin Trading Facility
Apple Logo
Downloadlogo
iOS App
Google Play Logo
Downloadlogo
Android App

RELATED ARTICLES

What is MGNREGA/NREGA - Job Card, Full Form & Eligibility

The National Rural Employment Act (NREGA), which has been renamed Mahatma Gandhi Rural Employment Act (MGNREGA), was initiated by Raghuvansh Prasad Singh, Minister of Rural Development, and was enacted by the Parliament of India. This act is considered an important measure taken by India's labour law to provide social security to Indian people as the "right to work". MGNREGA was enacted in September 2005, which promises a minimum of 100 days of paid work in a fiscal year. This act covers all members of Indian households who volunteer for unskilled manual labour. If you register for this system, you can find a job within 15 days from the date of registration by law. MGNREGA applies to all the states in India except Jammu and Kashmir. The allocated minimum wages are equal for all and may vary from state to state.

PF Withdrawal Form & How to Withdraw - Online, Login, Rules, & Process

The term PF withdrawal form, which stands for Provident Fund Withdrawal Form, refers to a form that enables interested people to access funds that have accumulated in accounts linked to EPFO (Employees’ Provident Fund Organization) schemes and programs. The Employees’ Provident Fund Organization (EPFO) is recognized as a non-constitutional organization that encourages workers to save money for retirement. The organization, established in 1951, is overseen by India's concerned ministries and legal authorities. The organization’s programs cover domestic and foreign workers (from nations with which the EPFO has formed bilateral arrangements).

What is Form 13 - Transfer of EPF Account & How to Fill/Download it Online

When paying the payee, the deductor/payer deducts tax. And the deductee/payee asserts this when filing an ITR using Form 26AS. Sometimes a payee's overall tax obligation is less than the TDS taken from his income. Additionally, he doesn't want to wait until the end of the year to request a tax refund that was withheld. In these circumstances, the payee may submit a Form 13 request to his Assessing Officer for a non-deduction or lower tax deduction following Section 197. (AO). For each fiscal year, a separate Form 13 must be filed. The deductor must also get the equivalent compensation for lesser or non-deduction of TDS/TCS.

Post Office Saving Schemes 2023: Interest Rate & Tax Benefit

India Post is the largest nationalised postal chain in the country which started way back during the British era in Oct 1854. Initially focused on delivering mail (post), it started rolling out various other financial services, i.e., banking, insurance, and investments. Not many people know, but one can now open a savings account in a Post Office branch and avail of the benefits of various savings schemes. Post office savings schemes contribute significantly to an Indian depositor's financial portfolio because of their country-wide availability, risk-free nature and comparatively high-interest rate earnings. Also, accounts for financially challenged people from different walks of life who have relatively small deposits find it easier to deal with the Indian postal service as the depositors' money is backed by the government. Moreover, earning professionals can also take advantage of tax exemptions on the interest they receive from their investments. In order to assist a depositor in India in building a well-balanced financial portfolio, let us examine in detail some of the post office saving schemes and the interest rates obtained on the investment.