What is Term Insurance?
A term insurance plan is a protection-oriented life insurance policy which covers the risk of death during the policy tenure. If the life insured passes away during the term, the plan pays a death benefit to the nominee.
A term plan can help your family face the financial loss in your absence. Some of the salient features of term plans are as follows –
- Meant for financial security Can help your family meet their liabilities, goals and expenses in your absence
- No savings element
- Premiums are affordable
- You can choose a suitable sum assured that is suitable for your family’s needs
- A guaranteed* death benefit is paid, and the plan is not exposed to market-related risks
What is ULIP?
A ULIP is an insurance product that offers a dual benefit of life insurance coverage and investment in market-linked funds to help achieve long-term financial goals. The premiums that you pay towards the policy are invested in market-linked funds that can give you returns over time.
ULIPs also offer flexibility and complete control over your money with features like switching, partial withdrawals, top-ups and more.
Some of the salient features of ULIPs include the following –
- They are designed to offer life insurance protection along with investment returns
- Come in different variants like child plans, annuity plans, or even whole life plans
- You can invest in different types of market-linked funds, which include equity, debt, and balanced funds
- Switching helps you change between investment funds with changing investment strategies
- Partial withdrawals after 5-year lock-in period give liquidity during the policy term
- Top-ups help you pay an additional premium to invest more
- The higher of the sum assured or fund value is usually paid as the death benefit
- On maturity, you receive the fund value
Term vs ULIPs – A comparative analysis
Here is a comparative analysis between term insurance and ULIPs to assess them at different parameters so that you can make an informed choice –
| Parameter | Term insurance | ULIPs |
|---|
Purpose
| Meant to provide financial security to your family when you are not around
| Meant to provide life cover as well as create a market-linked corpus by gaining exposure to the Indian markets
|
Financial goal
| Income replacement
| Long-term savings and wealth creation
|
Affordability
| Premiums are lower. They are calculated based on your age, sum assured, policy details, medical risks, etc.
| Premiums are higher, and you can determine how much premium you want to pay
|
Maturity benefit
| Usually, term plans have no maturity benefit. However, you can get the premiums refunded with return of premium term plans
| The fund value is paid on maturity
|
Returns
| Term plans have no saving element and hence do not offer returns
| You have the potential to earn market-linked returns on the invested premium
|
Liquidity
| Not available
| Available through partial withdrawals
|
Who Should Choose What?
Now that you know the basics of term insurance and ULIPs, the next question is – which one to choose?
The choice between the two plans depends on your financial goals. Term insurance plans are suitable for all NRIs looking to create a financial security net for their family or parents in their absence. They are useful if –
- You want your family to be financially independent even in your absence.
- You want your liabilities to be paid off.
- Risk coverage is your main goal.
On the other hand, ULIPs are suitable for NRIs looking for –
- Life Insurance Coverage
- Exposure to Indian markets
- Wealth creation for financial goals
- Long-term investment horizon
- Flexibility in managing their savings
- Tax benefits on investments
You can choose both term insurance and ULIPs to combine financial security with market-linked investment returns and reap the benefits of both plans.
Conclusion
Assess your financial goals and then make the right choice between term insurance and ULIPs. If you don’t want to compromise on your family’s financial protection, you may choose a term plan and secure their future. Once you have a term plan in place, you can explore ULIPs and buy them for your insurance and wealth creation needs. Combine the power of both plans and enjoy a well-rounded financial portfolio.
FAQs
Will my insurance policy be valid if I return to India after a few years?
Your insurance policy would not be affected by your return to India. However, it is better to inform the insurance company of your return so that the correspondence address can be changed for future communication.
How can I pay premiums for the life insurance plans I buy from India while I live in Qatar?
You can pay the premiums through international wire transfers or from an NRO or NRE bank account held in an Indian bank or through swift transactions. Remember, the premium payment would be done in Indian Rupee.
How many life insurance policies can I buy in India?
There is no restriction on the number of life insurance policies that you can buy in India. You can buy as many plans as needed, depending on your financial goals.
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