A term plan is a sub-subject of life insurance. Since it is the cheapest life insurance product amongst the rest, many of you might purchase term insurance over other traditional insurance plans such as endowment policies, money-back plans, and so forth. The primary aim of term insurance can be to offer financial protection to your loved ones. Due to the goal of family security, term plans offer a financial pay-out to maintain the standard of living of your loved ones.
While selecting term insurance for you and your family, you might come across its different types. Apart from a regular term life insurance policy, you can also find a guaranteed term plan. Since there are two options, you might be unable to identify the right term plan that is suitable for you. Therefore, let’s understand what a term plan and a guaranteed term life insurance is in detail:
A term life insurance policy is a pure protection plan, which can be specially designed to protect your family members from uncertainties such as loss of income, critical illness, death, and so on. A term plan that initially only provided death benefits has ensured the provision of survival benefits as well. Today, you can receive death benefits as well as survival benefits if you choose a new-age term plan called smart term insurance.
What is guaranteed term life insurance?
A guaranteed term life insurance can be a renewable plan that can continue in the long run with the timely payment of premiums. When you pay your premium regularly, your insurer would not be able to terminate your guaranteed term life insurance policy. However, the guaranteed benefits might vary from one insurer to the other.
After understanding the meaning of both the policies, many of you might be unable to identify the difference between them. Failure to spot the differences between term insurance and guaranteed term life insurance can lead to chaos at the time of purchase. Therefore, let’s take a look below to learn how to distinguish between both these policies from one another:
The premium of every life insurance policy is the pre-decided amount, which your insurer charges in return for the provision of life coverage. Moreover, it can depend on specific factors such as your age, current health status, and so on. While the term insurance premium can be relatively low, the premiums for guaranteed term insurance can be high. The high premium rates under guaranteed term insurance can make the plan expensive.
- Death benefit
Unlike regular term plans, guaranteed term insurance can provide low death benefits to your family members in your absence. However, term insurance can provide you with the flexibility to select the sum assured value based on the financial requirement of your family. Moreover, your loved ones can decide whether they want to receive it as a monthly income or a lump-sum amount.
- Medical tests
Medical tests can be an essential factor of consideration under term insurance. When you undergo medical tests, your insurer analyses your health condition based on your medical report. After going through your test result, your insurer charges the premium amount accordingly. However, medical tests might not be mandatory under guaranteed term insurance.
- Graded benefit
Under regular term plans, a lump-sum amount can be paid to your nominees after your demise. However, graded benefits can play a crucial role under guaranteed term insurance. When you purchase guaranteed term insurance, your nominees might not be eligible to receive the whole death pay-out until your policy is active.
In a nutshell, term insurance and guaranteed term policy are different from each other in the above-mentioned aspects. Hence, you should research about various available options and consider your financial goals. After choosing an insurance product based on your needs, read the policy document in detail. If you are unable to understand specific details, seek professional help to guide you through the fine print of your selected policy.