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Demystifying Traditional Life Insurance Plans

A traditional insurance plan ;is one of the oldest life cover plans. These plans are made to give financial protection to your loved ones if something uncertain happens to you. Many people wonder "What is a traditional insurance plan?" ;or "Is it the right choice for me?" ;This blog will help you understand such plans in the simplest way possible.


Traditional life insurance plans ;are not focused on growing your money. These plans provide safety, peace of mind, and long-term support. These plans usually offer life cover and assured returns. But still, many people avoid buying them because they do not fully understand how they work. So let’s bust some myths and help you make better choices.


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Written ByShruti gujarathi
AboutShruti gujarathi
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Shruti gujarathi has 5 years of experience in the BFSI sector, and as Manager- Digital Marketing at Bajaj Allianz Life Insurance, manages digital and content marketing. She has had hands-on experience in content strategy, performance marketing and Strategic Alliances over a career spanning 10 years.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 30th May 2025
Modified on: 02nd June 2025
Reading Time: 15 Mins
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Myth 1: My Money Will Not Grow in Term Plan


A common concern about a traditional insurance plan is that your money won’t grow like it does in mutual funds or stocks. That’s true to some extent as these plans are designed mainly for providing protection, and not for generating profits. Think of it like car insurance- it doesn’t give you money back if there is no claim made under the policy, but it provides you safety.


The goal of a traditional life insurance plan is to offer life cover. This means your family gets a fixed sum assured if the insured event occurs. While it’s not an investment which helps in financial growth, but it gives mental peace by providing financial protection to your loved ones.


Myth 2: Term Insurance Is an Unnecessary Expense


Some people think that a traditional insurance plan is a waste of money. But let’s look at some facts:


  • You can get a large life cover (like ₹1 crore) for a nominal monthly premium amount.
  • The plan protects your family financially if an uncertain event occurs.
  • You’re not just paying money—you’re buying peace of mind.
  • Some traditional life insurance plans also offer return-of-premium features. So, if you live till the end of the policy term, you get your premiums paid back.

When you’re alive, you take care of your family. A traditional insurance plan ensures that care continues even if you're not around. So, it's not an extra expense—it's a smart safety net.


Myth 3: I Should Only Buy Policies That Offer Both Life Cover and Maturity Benefits


While it's completely fine to prefer plans that provide both life cover and maturity benefits, you just need to ask yourself, "Can you afford sufficient life cover using these plans?"


Plans with maturity benefits generally have higher premiums. You may end up reducing life cover due to the higher costs. Term insurance plans offer significantly more life cover at a much lower cost.


The best strategy is to strike a balance. Consider buying a term plan with good life cover, and if the budget allows, you can complement it with another savings-related plans.


Conclusion


Buying a traditional insurance plan is like building a safety wall around your family. It may not give high returns, but it gives something far more valuable—financial protection and peace of mind. Many people avoid these plans because of myths or confusion. But once you understand how they work, you will find them very useful.


These plans are also evolving. Some plans now offer features like return of premium or rider options. If you are looking for a plan that offers security and fits your budget, a traditional life insurance plan can be a good choice.


FAQs


What is traditional term insurance?


A traditional term insurance plan gives life cover for a fixed number of years. You choose the time, like 10, 20, or 30 years. If the insured event occurs during that time, your nominee gets the sum assured . But if you outlive the policy tenure, you don’t get any money back. This kind of plan is useful if you only want to financially protect your family even in your absence. It’s simple, cost effective, and gives substantial financial support to your family if you’re not around.


What is the 3-year rule for term insurance?


The 3-year rule is a safety rule made by IRDAI. It says that if a term insurance policy has completed three years, the insurance company cannot reject a claim unless it can prove something serious, like cheating or hiding facts. So, after 3 years, your family’s claim is usually safe. This rule gives peace of mind. It protects families from claim rejection in hard times. It also means you should share correct health and personal details when buying the policy, so the claim is not rejected later.


What is the difference between a term plan and a traditional plan?


A term plan is simple. It gives only life cover for a fixed time. If the insured event occurs during the plan tenure, your nominee gets the money. If you outlive the policy term, there’s no benefit. A traditional insurance plan, on the other hand, may also offer maturity benefit at the end of the policy term if you outlive the policy term. These plans include savings or bonuses. Term plans are cheaper and give high cover. Traditional plans offer stable returns and capital protection, though they typically come with higher premiums and modest growth.. So, term plans are for pure protection, and traditional plans give a mix of protection and savings.


What is a traditional plan in insurance?


A traditional insurance plan is a safe and old-style life policy. It gives your family a fixed sum assured of money if the insured event occurs. Some traditional plans also give you a payout if you live till the end of the plan tenure. These plans do not depend on the stock market, so your money is safe from market ups and downs. They are best for people who don’t want any risk and prefer steady, simple benefits. You pay regular premiums, and your family gets financial protection.


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The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale. Bajaj Allianz Life Insurance Company Ltd., Regd. office Address: Bajaj Allianz House, Airport Road, Yerawada, Pune - 411006, Reg. No.: 116, CIN: U66010PN2001PLC015959, Call us on toll free No.: 1800 209 7272, Mail us: customercare@bajajallianz.co.in

Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility

 

BJAZ-WEB-EC-15331/25

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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