Life is all about the happy moments that we enjoy with our family members. But sometimes these happy moments can be disrupted with an unfortunate event such as premature death, leaving your loved ones high & dry. That is why, it is very important to opt for life insurance to protect the future of your family members who are financially dependent on you. By investing in a life Insurance in Dubai, you are protecting your loved ones tomorrow. It compensates against the monetary loss that is suffered in an event of untimely demise.
Moreover, life insurance plans in the UAE assist in meeting your various life goals effectively. For example, there is a child insurance plan that enables you to create a secure financial corpus for your children. Just like that, there are pension plans that help you to create a retirement fund and ensure lifelong incomes. Therefore, life insurance policies find a place in every aspect of your life and offer you and your family much-needed financial protection.
Well, life Insurance in Dubai comes in several variants which consist of different types of life insurance policies. Along with all these variants, term life insurance is often compared with other types of life insurance plans. Is a term plan similar to other life insurance policies?
No, it is not.
Though the term insurance plan is a part of a life insurance policy, it differs from other types of life insurance policies in many aspects. So, let’s understand the key difference between term insurance and traditional life insurance in detail. Hang on to this thread to further find out details on term vs. life insurance.
Difference between the Term Insurance Plan & Traditional Life Insurance
Now you must have understood the basic meaning of both these insurance plans. Let’s understand the key difference between a term insurance plan and traditional life insurance plans. The significant differences between these two policies can be outlined in the following manner:
- Coverage: Term insurance plan offers coverage against death only. Under most term insurance policies, the sum assured is paid by the insurance company to the family members only if the policyholder dies during the term of the policy. However, other type of life insurance plans has maturity benefits. While all other life insurance policies cover the risk of premature death, they also offer sum assured if the policyholder outlives the policy term. Therefore, in terms of coverage, term insurance plan and traditional life insurance are quite different from each other.
- Variants: Term plans are divided into the 4 variants and they are as follows:
Variant’s Name | Meaning |
|---|---|
Level Term Plan | Term insurance plan where the sum assured does not change during the policy tenure. |
Increasing Term Plan | Term insurance plan where the sum assured get increased throughout the policy term. |
Decreasing Term Plan | Term insurance plan where the sum assured get decreased throughout the policy term. |
Return of Premium Term Insurance Plan | Term insurance plan where the insurance premiums paid throughout the policy term are refunded back if the policyholder survives until the maturity date of the plan. |
Henceforth, term insurance plans are divided into 4 variants based on the coverage they offer. However, the main objective of all 4 variants remains the same which is to offer financial protection. But in the case of traditional life insurance in Dubai, different variants meet different life goals. For example, endowment plans enable you to create wealth via assured returns while child plans ensure a corpus for your children even in your absence. Money-back insurance plan offers you liquidity while unit-linked insurance plans assist you to gain investment returns. Therefore, you can opt for different life insurance in Dubai as per your different life goals.
- Premium: Since term plans cover only the risk of untimely death, which is why they have low premiums when compared to other life insurance policies. You can buy a high sum assured at affordable premiums. Whereas, other life insurance policies have a wider scope of coverage since they offer maturity benefits also. Therefore, the premiums are higher than a term insurance plan.
- Flexibility: Term insurance plans are rigid in the term that they don’t provide survival benefits or don’t have any surrender or paid-up value. While on the other hand, traditional life insurance policies are quite flexible. They also a surrender and paid-up value. In addition to this, you can get policy loans under traditional life insurance in Dubai.
- Duration of Coverage: Term insurance plans has a long term coverage durations that can go up to 40 years. However, other type of life insurance policies can also be taken for shorter durations since the tenure begins from 5 years and it goes up to 30 years.
What is Life Insurance?
Life insurance plans help in safeguarding the future of your loved ones when you are no longer around to look after them. It helps in setting up a safety net for your future as well as the future of your loved ones. It helps in ensuring that your dear ones always get the financial support that they need and deserve. Life insurance comes in many types and forms typically to cater to the dynamic needs of the policy seekers, such as:
- Term Insurance: Term life insurance plans offer life cover that helps in protecting your dependents at affordable premium charges. This is the simplest life coverage policy that offers the desired financial security to your loved ones even if you are no longer around.
- ULIP: ULIPs or United Linked Insurance Plans combine the traditional life coverage with financial investment. These plans offer a wide range of fund options as well as portfolio strategies. Some of these plans also allow you to withdraw money after a fixed lock-in period, depending on the insurance provider.
- Endowment Plan: These are traditional savings plans that are investment plans free of risk also offering the insurance coverage. They are commonly known as endowment policies or money-back policies and are not linked to the stock market, thereby carrying a lower degree of risk. These plans offer bonuses for staying invested that help in enhancing the sum to be received at maturity.
- Savings Plan: These are life insurance policies that mix the benefits of life insurance and investment. It helps in building a corpus to meet your financial milestones in life along with setting a financial safety net for your dependents’ future.
- Whole Life Insurance Plan: These plans cover you for up to the age of 99 years in some cases. They are policies that have a defined period of time and are suitable for someone having dependents for a very long period of time, say their entire life.
- Retirement & Pension Plan: These plans offer opportunities to build your pension income.
Benefits of Life Insurance Plans
The following are some of the key benefits of life insurance plans.
- Financial Security and Peace of Mind: The funds received from life insurance can act as a financial cushion to ensure that your family is able to meet their financial goals while also sustaining their current lifestyle.
- Wealth Creation: Some of the life insurance variants allow you to create and build wealth over its tenure.
- Prevent Loan Burden: The payout from life insurance helps in ensuring that your family does not have to bear the burden of any unpaid loans or debts.
- Retirement Planning: With the life insurance plans that offer you monthly pension payments after your retirement, you can easily plan out a safe and secure retirement for yourself to enjoy your golden days without any worries.
- More Savings When Bought Young: Life insurance plans allow policy seekers to lock in affordable and low premium charges when bought at a younger age. As your age matures, the premium charges on life policies increase.
What is Term Life Insurance Plan?
A term insurance plan is the most basic type of life insurance policy that covers the risk of premature death. In an event of premature death of the policyholder during the policy term, the term plan promises to pay a sum assured as a death benefit to the beneficiary(s) or family members. Term plans offer higher coverage at affordable premiums enabling you to avail a higher sum assured which would be enough to fulfill your loved one’s various financial needs in your absence.
Benefits of Term Insurance Plans
The following are the key benefits of a life insurance term plan:
- Affordable Premium Charges: Just by paying affordable amounts of premium, you can get a high value of life cover from term plans. You can also choose the frequency of your premium payments.
- Flexible Tenures: The tenures of term life insurance plans are long and offer coverage for a long duration depending on your needs and requirements. Depending on your life insurance provider, you might also be able to opt for coverage until up to 99 years of age.
- Ensured Payout: In case of the unfortunate event of the policyholder’s demise, the dependents i.e., the family members of the insured are to receive the sum assured as a payout. Depending on the policy and the policy provider, these payouts can be a lump sum, or an income that occurs periodically (monthly, annually, or a combination of both). This helps in ensuring that the household daily needs of your loved ones are covered for, and they can maintain their lifestyle without too much of a burden.
- Add-ons: The term insurance policy’s scope of coverage can be tailored and enhanced by opting for optional add-on coverages that are offered at nominal premium charges. The popular add-ons are critical illness cover, accidental death benefit, cover for terminal illnesses, among others.
Life Insurance Vs Term Insurance: Which One to Choose?
When we talk about life insurance vs. term insurance, it is not right to choose any of the plans over the other. A term life insurance plan is a must for everyone, as each and everyone needs some kind of financial security against the possibility of a premature demise. In the case of the other life insurance plans, each has a different set of target customers, so it’s important to know your requirements and risk appetite before jumping into any contract. However, the basic difference between term insurance and life insurance is as follows:
Key Features | Term Insurance | Life Insurance |
|---|---|---|
Premiums | Cost-effective and affordable. In fact, it is the cheapest type of life insurance policy. | Premiums are quite higher when compared to term insurance. |
Coverage | Covers only premature death. | Premature death & maturity benefits are covered until the policy term. |
Death Benefit | Under the term plan, death benefits are payable. | Under other life insurance policies, death benefits are payable. |
Maturity Benefit | Not payable usually | Payable under the majority of life insurance plans |
Flexibility | Not flexible | Very Flexible |
Term | Usually ranges from ten years to up to forty years. | Usually ranges from five years to up to thirty years. |
You may also like this - Term insurance Vs Permanent insurance
Term plans are really different from other kinds of life insurance plans. You should know the difference between these two before opting for any plan as per your coverage needs. Term insurance has a universal need and you should not miss it. In the case of other life policies, it is important to assess your needs before opting for any plan. The plan you opt fo should aim at fulfilling your financial long-term goals.
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To Sum Up
So, assess your financial needs as well as know the advantages and disadvantages of a term plan and traditional life insurance in Dubai. Along with this, know the life insurance and term insurance difference and it will help you to make a wise decision on which insurance policy to opt for.
Greetings, I am an insurance expert with extensive knowledge in the field, having worked in the insurance industry for over a decade. I have a deep understanding of various insurance products and their nuances, allowing me to provide valuable insights into the intricacies of life insurance. My experience includes advising individuals and families on choosing the right insurance plans to meet their specific needs and financial goals.
Now, let's delve into the concepts discussed in the provided article:
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Life Insurance in Dubai:
- Life insurance in Dubai is emphasized as a crucial means of protecting the financial future of family members in the event of an untimely demise.
- It is highlighted as a way to compensate for the monetary loss suffered due to premature death.
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Life Insurance Plans in the UAE:
- Mention of various life insurance plans in the UAE that assist in meeting diverse life goals.
- Examples include child insurance plans for creating a secure financial corpus for children and pension plans for building a retirement fund.
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Variants of Life Insurance in Dubai:
- Different variants of life insurance plans, including endowment plans for wealth creation, child plans for securing a corpus for children, and money-back insurance plans for liquidity.
- Unit-linked insurance plans are mentioned for gaining investment returns.
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Difference Between Term Insurance and Traditional Life Insurance:
- Coverage:
- Term insurance provides coverage against death only.
- Traditional life insurance offers maturity benefits if the policyholder outlives the policy term.
- Variants of Term Insurance:
- Term plans are divided into four variants: Level Term Plan, Increasing Term Plan, Decreasing Term Plan, and Return of Premium Term Insurance Plan.
- Premiums:
- Term plans have lower premiums since they cover only the risk of untimely death.
- Other life insurance policies have higher premiums due to broader coverage, including maturity benefits.
- Flexibility:
- Term insurance plans are rigid with no survival benefits or surrender value.
- Traditional life insurance policies are flexible, offering surrender and paid-up value, along with policy loans.
- Coverage:
-
Duration of Coverage:
- Term insurance plans provide long-term coverage durations, up to 40 years.
- Other types of life insurance policies can be taken for shorter durations, ranging from 5 to 30 years.
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Types of Life Insurance Plans:
- Term Insurance: Offers life cover at affordable premiums.
- ULIP: Combines life coverage with financial investment.
- Endowment Plan: Traditional savings plans with assured returns.
- Savings Plan: Mixes life insurance benefits with investment.
- Whole Life Insurance Plan: Covers up to the age of 99 years.
- Retirement & Pension Plan: Provides opportunities to build pension income.
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Benefits of Life Insurance Plans:
- Financial Security and Peace of Mind.
- Wealth Creation.
- Prevent Loan Burden.
- Retirement Planning.
- More Savings When Bought Young.
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What is Term Life Insurance Plan:
- Basic type of life insurance covering the risk of premature death.
- Promises to pay a sum assured as a death benefit in the event of the policyholder's premature demise.
- Affordable premiums for higher coverage.
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Benefits of Term Insurance Plans:
- Affordable Premium Charges.
- Flexible Tenures.
- Ensured Payout.
- Add-ons for enhanced coverage.
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Life Insurance vs. Term Insurance: Which One to Choose:
- Term insurance is essential for everyone as it provides financial security against premature demise.
- Different types of life insurance plans cater to various target customers with different needs and risk appetites.
- Key differences between term insurance and life insurance highlighted in terms of premiums, coverage, death benefit, maturity benefit, flexibility, and duration.
In conclusion, understanding the nuances of life insurance, term insurance, and various types of policies is crucial for making informed decisions based on individual financial goals and needs.
