Simplifying Life Insurance in India
Differences Between Term Insurance and Whole Life Insurance Policy
Among the different life insurance policies, two popular ones are term life insurance and whole life insurance plans. Term insurance gets you coverage for a specific period. In case the insured person expires, the beneficiary receives the policy benefit. On the contrary, a whole life insurance plan provides life-long protection.
Now, if you are wondering about whole life insurance vs term life insurance policy and which one you should opt for, keep reading to know in more detail.
What Is a Term Life Insurance Policy?
Among different life insurance policies, term insurance plans have been fairly popular. This is because the term plan provides financial security to the family of an insured person in case of any unfortunate incident. It also comes with an affordable rate of premium.
The plan provides life coverage to an insured person for an extended period based on the duration or ‘term’ opted for. The policyholder decides the assured sum when buying a term insurance plan.
What Is a Whole Life Insurance Policy?
As its name suggests, this insurance plan provides life-long coverage, which goes on throughout the validity of the plan. Therefore, choosing a whole life insurance plan protects your family financially during an unfortunate incident.
Apart from an insurance facility, this insurance plan also provides an investment benefit. Since a sufficient amount of money is collected in the form of premium payments, this plan enables you to use that money if you are in need.
What Are the Key Differences Between Term and Whole Life Insurance Plans?
The major differences between term life insurance and whole life insurance policies are discussed in the table below:
|
Factors |
Term Life Insurance Plan |
Whole Life Insurance Plan |
|
Premium |
The premium for term life insurance plans is lower than whole life insurance. |
Comparatively higher than term insurance plans. |
|
Coverage Period |
In general, the coverage period ranges between 10 years and 30 years. |
It provides lifetime coverage. |
|
Permanent Coverage |
No permanent coverage is offered. |
It offers permanent coverage. |
|
Premium |
Remains constant or increases sometimes. |
Always remain constant. |
|
Cash Value |
No cash value is involved |
Cash value is present, and it accumulates in due course of time. |
|
Dividends |
Term life insurance does not provide any dividends. |
Depends on the insurance provider. |
|
Health Exam |
It is usually required but also depends on the insurance amount. |
Yes, health examination is necessary for whole life insurance plans. |
|
Favourability |
It is favourable for someone who is opting for a short-term plan. |
It will be suitable for someone looking for a long-term plan. |
|
Use in Estate Planning |
Not commonly used. |
Used. |
|
Bonuses |
Term insurance plans do not provide any bonus. |
In case of a whole life insurance plan, you will get bonuses. |
What Term Life Vs Whole Life Insurance: Which One Is Better?
If you are wondering which is better, term or whole life insurance policy, it purely depends on your financial security needs and goals. If you require life insurance for a considerably short term (while your objective is to nurture your minor children and provide them financial security), choosing term insurance will be a better choice as its premium is quite affordable.
On the other hand, if your objective is getting permanent coverage which will continue throughout your life, considering a whole life insurance plan is ideal. Whole-life policies also help you enjoy several survival benefits like tax-free cash value accumulation.
Now, after the above discussion, you can understand how term insurance differs from whole life insurance policies apart from their types. Also, you must have understood whole life insurance vs term insurance plans and which one should suit you. Make sure to go through the available policies with diligence and opt for a plan to meet your financial goal while ensuring the security of your family.
FAQs About Differences Between Term Insurance and Whole Life Insurance Policy
What are the key advantages of whole life insurance?
Whole life insurance provides the following benefits:
- Constant Premiums: The premium amount in this policy remains unchanged throughout the life of your insurance policy, despite your age or condition of health.
- Death Benefits: The nominee receives the sum assured, also called the face amount of a policy, on the insured person's death.
- Cash Value: The cash value of your policy will increase every year, which is tax-deferred. It also offers a loan facility.
Is it possible to have multiple-term insurance policies?
What is the ideal age to get whole life insurance?
What are the benefits of term life insurance?
Following are the advantages of term life insurance:
- Minimum premium
- No additional charges
- Tax benefits
- Rider benefits
- Flexible
Other Important Term Insurance Guides
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
