Term Life Insurance Vs Traditional Life Insurance: Which Is A Better Option?

When protecting your family in 2026, one of the first choices you face is between a term insurance plan and a traditional life insurance cover. Aditya Birla Sun Life Insurance (ABSLI), regulated by the Insurance Regulatory and Development Authority of India (IRDAI), offers both. A key 2026 change applies to each. Since 22 September 2025, GST on individual Life Insurance premiums is 0% (down from 18%), making both more affordable.

As per IRDAI and insurer disclosures for FY 2025-26, ABSLI settled 98.86% of individual claims with 630+ crore total claims paid. A Term Plan is pure protection at a low cost, paying your family a large sum if you die during the term but nothing if you survive it. A traditional plan (such as an endowment, whole life, or savings plan) bundles life cover with a savings element, so it costs more but returns money through maturity benefits or bonuses.

Term vs. Traditional Life Insurance: 2026 comparison

Feature	Term Insurance	Traditional Life Insurance
Primary purpose	Pure income protection	Protection + savings/investment
Premium	Low	Substantially higher
Maturity benefit	Usually none	Yes (maturity value / bonuses)
Cover amount	Very high for the premium	Lower for the same premium
Returns	None (unless ROP)	Guaranteed additions / bonuses
GST (from 22 Sep 2025)	0% (individual)	0% (individual)
Best for	Maximum protection at low cost	Disciplined saving with cover

What is Term Insurance?

Term Insurance is the simplest, purest form of life cover. You pay a low premium for a chosen term, and if you pass away during that period, your nominee receives the sum assured. If you outlive the term, there is usually no payout, which is exactly why the premium is so low. A healthy 30-year-old can secure ₹1 crore cover from roughly ₹9,000-10,000 a year. Explore the ABSLI Term Insurance range.

Consider Ajay, 28, with a Home Loan, a Car Loan, and plans to fund his child's education. He buys a Term Plan with a ₹75 lakh sum assured over 30 years. If he passes away during the term, his family receives the payout to clear loans and maintain their lifestyle. If he survives, there is no payout, but he has enjoyed three decades of affordable protection during his most financially responsible years.

What is Traditional Life Insurance?

Traditional Life Insurance combines protection with savings. Endowment Plans, Whole Life Plans, and Guaranteed Savings Plans pay a death benefit if you pass away and also return money through a maturity benefit or bonuses if you survive. Premiums are higher because part funds the savings element. These plans suit people who want disciplined, low-risk saving alongside life cover.

ABSLI options include the ABSLI Savings Plan (guaranteed additions in the first five years plus bonuses) and the ABSLI Assured Savings Plan. Explore them on the ABSLI Savings Plans page.

Which should you choose in 2026?

• Choose Term Insurance if: Your priority is maximum life cover at the lowest cost to protect dependents, and you prefer to invest your savings separately in options like PPF, Mutual Funds, or NPS.
• Choose Traditional Life Insurance if: You want guaranteed, low-risk savings bundled with life cover and value the discipline of a maturity payout, even at a higher premium.
• Consider both: Many families buy a large Term Plan for protection and a smaller Savings Plan for a guaranteed goal such as a child's education.

Estimate your cover with the ABSLI Term Insurance Calculator before deciding.

Does the 0% GST change apply to both?

Yes. Since 22 September 2025, Individual Life Insurance premiums, both term and traditional plans, carry 0% GST instead of 18%. This lowers the cost of either choice. Group policies still attract 18% GST.

ABSLI Claim Settlement Ratio vs. leading insurers (FY 2025-26)

Whichever you choose, the cover only helps if the insurer pays. As per IRDAI and insurer disclosures, ABSLI settled 98.86% of claims in FY 2025-26

Insurer	Claim Settlement Ratio (FY 2025-26)
Axis Max Life	99.78%
HDFC Life	99.72%
ICICI Prudential Life	99.34%
Aditya Birla Sun Life Insurance (ABSLI)	98.86%
LIC	97.55%

Source: IRDAI Annual Report 2025-26 and insurer public disclosures (Form L-40). ABSLI's own disclosures report a CSR of 98.86% for FY 2025-26.

Conclusion

Term and Traditional Life Insurance serve different goals: term delivers affordable, high protection, while traditional plans combine cover with guaranteed savings. With 0% GST on individual premiums since September 2025 and a 98.86% individual claim settlement ratio for FY 2025-26, ABSLI is a dependable choice for either. Assess your needs, protection versus savings, and explore the ABSLI Term Insurance and Savings Plans pages.