If you are new to the financial world and are quite confused as to what exactly is insurance, term insurance and life insurance you are at the right place. I will in very brief and a layman’s language explain you what these terms mean and why should you be very clear on these. These terms are not only important for your financial planning but for your life as well.
What is term insurance
Term insurance in simplest form means the investor pays some money to life insurance company and if he dies the life insurance company pays his family a amount of money. The payment that the investor is making can be made in one installment or regular annual installments. This payment that the investor makes to the life insurance company is called premium. The sum that the life insurance company promises to pay the family is called sum assured. All life insurance policies have a fixed period for which the payment is made, this time is called the term of the policy.
What is life insurance
Life insurance as a whole is the way a investor protects the financial status of his family by insuring his life. Life insurance is a tool that helps people pass on the risk on their life to a life insurance company for a fixed subscription. The investor calculates the amount of money he will be able to earn in his life time and accordingly buys life insurance for tht amount at a small price.
Is life insurance same as term insurance
Term insurance is a product of life insurance. Life insurance is a concept of insuring lfe and term insurance like other products helps people define the life insurance. Besides term insurance there are other life insurance products as well. Some popular life insurance products are endowment policy, pension policy, child policy and health policy.
Which is better life or term insurance
Like I explained above life insurance is a concept and term insurance is a product of life insurance so its not wise to compare the two Though a valid question would be if term insurance is the only form of life insurance or if term insurance is the best product of life insurance. Term insurance is the simplest form of life insurance and the cheapest one too. In a term insurance the money is paid to the family only in case of death of the life insured and then there are other forms of life insurance that also pay even if the investor survives the life insurance term.