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Cathy Said:

What is the difference between ordinary life insurance and term insurance?

We Answered:

Hi Abhik,

Here are the details:

1. term Insurance: Term insurance is pure insurance product. It is the base of any insurance product, be it a endowment insurance or ULIP. In term insurance, if policy holder dies, then only his / her nominee receives the sum assured. But in case policy holder survives the entire term, then he / she doesn't receive anything.

However premiums are very low and it should be taken to insure your financial obligations like home loan, personal loans etc. as well as your life.

2. Ordinary insurance: I believe, by ordinary insurance you mean endowment and ULIP kind of policies. They are the combination of term insurance and investment component. Part of your premium is used to pay for term insurance premium and rest is invested depending your policy i.e. debt products for endowment, child policies, equities for ULIPs and so on. So you receive returns from the investment made out of your premiums. However premiums of investment products are very high compared to term insurance.

If you need more help, the you can contact me (pranav_ss7@yahoo.com).

Regards,

Pranav