Family Term Insurance vs Individual Term Insurance: Which is Better?
Selecting the right life insurance can be hard because there are so many choices and factors to consider. Term Life Insurance Plans, Whole Life Insurance Plans, Unit-Linked Insurance Plans, Endowment or Savings Plans, Money-Back Policy and Retirement Plans are among the various types of life insurance plans available in India.
Of all the life plans, term insurance is the most affordable type. If you’re considering buying a term plan, then this guide will delve into the nuanced differences between Family Term Insurance and Individual Term Insurance, helping you understand which option might better serve your unique needs and circumstances.
Differences Between Family Term Insurance and Individual Term Insurance
Deciding which insurance option is right depends on many factors, such as age, health, family structure, financial dependents, income, and the length of the policy.
Family Term insurance: In this type of policy, there is an agreement between the insurance company and the policyholder. Policyholders pay a particular sum of money, which is known as a premium, and in exchange, they get financial protection. The nominee will receive the total cash when the policyholder dies.
Individual Term Insurance: Individual term insurance provides life coverage for a single person. Each policy is separate and tailored to the specific needs of that individual, offering Life Insurance Coverage for a set term (e.g., 10, 20, or 30 years) with the option to renew or convert at the end of the term.
Here is a quick table to help you understand it better.
|
Features |
Individual Term Insurance |
Family Term Insurance |
|
Underwriting |
Requires underwriting, including a medical examination and disclosure of medical history. Premiums are based on the policyholder’s health and medical history. |
May not require individual underwriting for each member; coverage is provided to all members without considering individual health conditions. |
|
Sum Assured |
Typically offers customisable sums assured based on individual needs. Higher sums assured are often available. |
It provides a fixed sum assured for all members under a single policy. Compared to individual policies, coverage customisation is limited. |
|
Tax Benefits |
Premiums qualify for tax deduction under Section 80C of the Income Tax Act (up to ?1.5 lakh in the old tax regime). |
Similar tax benefits as individual policies, with premiums qualifying for tax deduction under Section 80C, though specifics may vary depending on policy terms. |
|
Premium Payment |
Premiums can be paid monthly, quarterly, half-yearly, or annually, depending on the policyholder’s preference. |
Premiums are typically paid annually, though some policies may offer other payment options. |
Conclusion
Understanding the key differences can help you choose the option that best aligns with your personal needs and financial goals. Whether you seek customised coverage for yourself or a more straightforward plan for your entire family, making an informed decision will ensure that your insurance plan effectively supports your objectives.
