InvestorQ : Why do term insurance policies offer higher life coverage than other types of insurance policies?
Anushri Vasa made post

Why do term insurance policies offer higher life coverage than other types of insurance policies?

Answer
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3 years ago
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If a policyholder has taken a term insurance, then the premiums he/she pay are fully utilised towards creating a life cover.

Under the various other types of life insurance plans, only a part of the premium paid is allocated towards creating a life cover. The balance amount is utilised to provide for maturity benefits or as in the case of unit linked insurance plans (ULIPs) a part of the premium is used to meet administration and sales expenses.

This is why term insurance plans are more affordable than other plans. This is also the reason they are called pure protection plans because they only offer a pay-out in the event of the policyholder’s death. In contrast, other plans offer returns as well as life coverage.

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