Term V/S Whole Life Insurance: Which One You Should Buy?

You're not alone if the distinction between term insurance plans and whole life insurance seems a little hazy. While most people are aware that life insurance pays a sum of money to their beneficiaries in the event of their death, they may be unable to describe the distinctions and benefits of term and whole life insurance. However, if you want to safeguard your family's financial future, you need to understand the principles of these two options and choose the best alternative.

What is a Term Insurance Plan?

A term life insurance policy offers coverage for a set amount of time, usually between 10 and 30 years. It's also called "pure life insurance" since it has no cash value and is solely meant to pay out to your beneficiaries if you die during the term. Moreover, if you buy a term policy to cover your family, consider whether your family's life insurance needs will alter before the term ends. For the most part, this means the children are grown and living on their own, the house is paid for, and the surviving spouse has some money set aside as a safety net. 

What is a Whole Life Insurance Plan?

A whole life policy is a type of life insurance that guarantees death benefits for the insured for the rest of his or her life. These plans are for people who don't want to commit to a defined term and instead want to be covered by insurance until they pass away. As long as the premiums are paid, and the policy is not relinquished, the coverage is extended for as long as the insured lives. The policy will also accrue a cash value, resulting in greater premiums than comparable plans.

Term Insurance Policy V/S Whole Life Insurance Policy

Some of the distinctions between the two types of policies are as follows.

• Nature

  While both policies provide a death benefit to your beneficiaries, whole life also offers perpetual (lifelong) coverage with a cash value component. 

• Tenure

  While term insurance is only good for a set period of time, whole life insurance is good for as long as the policy is valid.

• Ideal For

  Term insurance is a fantastic option for someone looking for affordable short-term coverage. On the other hand, whole life insurance is appropriate for those seeking long-term protection as well as investment opportunities.

• Premium

  Because of the extra value, as well as the certainty that the insurer will have to pay a death benefit at some point, the premium for a whole life policy is higher than for a term policy.

• Increase in Premium

  Term insurance premiums continue to rise with each renewal period. Whole life insurance premiums are initially high but remain consistent over time.

Endnotes 

In reality, there are several factors to consider in addition to the type of plan you choose. What level of protection do you require? What are the various policy choices (or riders) available? Is there anything else you should get to protect my family? You can speak with a financial expert who will take the time to learn about your specific circumstances, listen to your worries, and clearly explain the various insurance options that best suit your needs and budget.

Also read: Do I Need a Term Insurance Plan If I Don't Have Dependents?

Term Insurance Tax Benefits Under Section 80D

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.