What is the difference between normal life insurance and term insurance. Is it both same or different?
Laxmish-In normal life insurance products (Endowment, Money Back, Whole life or ULIPs), there are two parts. One is insurance part and another is investment part. For example, if you invest Rs.100, then they take around Rs.4 to Rs.5 as a life insurance premium and rest they invest somewhere as per the policy agreement. At maturity they provide you the return. If something happens during policy period, then your nominee will receive the sum insured.
In case of term insurance, there will be only insurance part but not investment part. So they collect less premium. If anything happens during your policy period, then nominee receive the sum insured. If nothing happens during your policy period, then insurance company will not give you anything. Because they took only insurance premium but not any investable amount. Hence, term insurance products are cheap in nature and can be buy to full extent (like 15-20 times of your yearly income), which is not possible with other forms of insurance as such products comprise investment part and premium will be high.
Hope you understood the difference.
thank you sir. i got it. but one more doubt on it.. normal life insurance after maturity they give back the amount , what about term insurance.
Laxmish-I already replied. In term insurance, if you survive till maturity, then they will not give any amount. Because they collected only the life risk amount but not the life risk+Investment amount from you.