Term Insurance vs Whole Life Insurance

Term Insurance vs Whole Life Insurance

Term insurance and life insurance are 2 different products provided by the insurance company. Given a choice, one can choose any one of the products based on your financial ability to pay the premium and requirements in the future.

Both the policies have a common factor and serve in providing benefits to the beneficiary assigned by the policyholder.

Let’s take a look at the advantages of Term insurance:

  • It provides financial security: Leaving in a world of uncertain economy choosing financial security is a must. In the eventful death, this policy will take care of your loved ones.
  • Higher value returns: We normally pay higher premiums by adding addons to our insurance policy. Term insurance provides greater returns with lower premium value.
  • Choose your coverage: Term insurance gives you the flexibility to choose or customize the coverage you need. You can choose the tenure and also the amount of coverage that you are looking for.
  • Benefit on survival: Term insurance gives you a return on payments under the Term Return of Premium Plans (TROP). In the event of survival, you will get a return of the premium paid on maturity.
  • Add-ons: Term insurance can be enhanced with additional riders provided by the insurer. These add-ons will give additional protection at a very nominal cost. Riders could be an accidental death, critical illness, partial disability, permanent disability, etc.
  • Flexibility with payments: one needs not to worry or stress when it comes to the payment of premium. There are multiple choices available wherein you can pay monthly, quarterly half-yearly or yearly.
  • Tax benefit: all premium paid towards term insurance can be claimed against taxation.

Some advantages of Whole life insurance: Unlike the advantage of term insurance whole life insurance does have common benefits as well as other benefits.

  • Benefit for life: choosing whole life insurance will give you coverage for life.
  • Coverage assurance: Irrespective of whatever happens to you, you will be assured survival benefit.
  • Works as an investment: All payments made towards the policy are accumulated, helping one as a source of cash when required.
  • Borrowings: As the payments made are accumulated in an account, you are likely to borrow the amount subject to your requirement.
  • Financial source: As a common factor of Term Insurance whole life insurance also provides a financial source to your family and loved ones. This policy will come in handy at the time of your retirement.

The eligibility criteria for these policies will vary based on age, coverage type, gender, and insurer.

Different Between Term and Whole Life Insurance

Term Insurance

Whole Life Insurance

 

Under the term insurance policy, the insured pays a sum of premium for a fixed period.

One can opt for the sum assured.

The beneficiary gets the benefit of the policy only in the event the policyholder dies during the valid policy tenure

Life insurance provided survival or maturity benefits

 The premium amount is lower however your assured sum is higher

Premium payments can be for a specific time to it can be throughout life.

The benefits of term insurance are limited

Insurer allows borrowing money at lower interest.

 

There is no maturity or survival benefit

The policyholder gets the benefit of the policy.

Investments here do not work as a saving benefit. Money paid is gone forever

 

When to Buy Term Life Insurance?

Term life insurance provides coverage to a certain time as it protects your loved one and in the event of death, the beneficiaries receive the payment. We can also say that the policy is valueless.

While choosing a term life insurance, ensure that you choose the tenure of your paying bills as the insurance will provide coverage in the event of death. There are multiple plans available, always choose that plan which will provide cater to your family needs.

When to Buy Whole Life Insurance?

Unlike other life insurance policies, whole life insurance provides a lifelong cash benefit. As your money starts growing you will be accumulating a sum that is tax-differed. This policy allows you to borrow cash from the account or even surrender the policy. While surrendering you are no more covered under the policy, hence death benefit will not be applicable.

While choosing to buy Whole Life Insurance one can blindly opt for the plans. The premium once chosen remains the same throughout and the death benefit is guaranteed.

Choosing between Term Plan and Whole Life

The below comparison will help you to choose between Term Plan and Whole life.

Term Life Insurance.

  • With term life insurance you have the flexibility to choose the duration of the policy that will suit your needs. You can choose the duration considering the coverage you are looking for.
  • There is no provision of lifelong coverage in term insurance. Policy lapses on the day the tenure of the policy ends. Thus, does not support your lifelong.
  • The premium amount under term insurance generally remains the same.
  • Any policy you choose with term Insurance will always have a premium which is calculated at a substantial rate making it very easy for customers to buy. One can just go in for it.
  • Irrespective of the plan you opt for payments are assured subject to policy terms and conditions.
  • All payments made under the Term plan are lost and have no value or returns neither does it get accumulated. Hence all payments you make for the premium are lost.
  • As the payments made have no value there are not annual dividends or benefits.

Whole life insurance

  • Whole life insurance is a lifelong policy and there is no tenure. You can keep paying until death.
  • Under whole life, insurance one had coverage for a lifelong, which keep the policyholder stress free.
  • The premium in whole life remains the same throughout the policy term.
  • The premium payments are comparatively higher than the term insurance premium.
  • Whole life insurance guarantees the payments in the event of claims.
  • Whole life insurance works as a saving account. Payments made here are all accumulative and add value to your account.
  • The insurer may give you the benefit of the annual dividend based on your policy.