Articles 168 views August 2, 2021

Having a life insurance plan is essential to ensure that your family remains financially protected in case of your unfortunate death. Insurers offer different life insurance plans to customers from which they can choose according to their financial requirements and future goals. Term Insurance and Whole Life Insurance are the two most popular insurance products among customers catering to their different needs.

You can choose either or both of these life insurance plans as per your requirements. However, you should understand the details of both these plans before making a decision. On this page, we will be doing the same and a comparison of term insurance and whole life insurance based on several aspects. Let’s start without any further ado.

Term Insurance

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What is Term and Whole Life Insurance?

A term insurance plan is one of the most popular options among customers as it is an efficient and cheapest method to ensure their families’ financial security. Term insurance offers a lump sum amount to your family in case of your demise during the policy term. However, if you outlive the policy (completion of the policy term), you don’t get any payback (maturity benefits). An individual should buy term insurance if he/she has dependent children, a spouse or retired parents.

On the other hand, whole life insurance, as the name suggests, protects you throughout life. Under this insurance plan, the coverage period stands up to the lifetime of a policyholder. A whole life insurance plan offers both death and maturity benefits. You can also choose the coverage option and premium payment term according to your needs. An individual should buy a whole life insurance plan if he/she is looking for long-term protection and investment gains.

Comparison of Term Insurance and Whole Life Insurance on Different Aspects

After providing the basic information about term cover and whole life insurance, we have compared both of them on different aspects to give you a better understanding.

Coverage Period

One of the striking differences between term cover and whole life insurance is the coverage period. Term Insurance coverage lasts for a definite number of years during which you will get the benefits. On the other hand, whole life insurance offers longer coverage as compared to term plans. Some policies offer coverage even up to 100 years of age.

Premium Amount

The premium amount of term life insurance tends to be lower as compared to the whole life plans. So, you can get higher coverage by paying an affordable premium. However, in the case of term insurance plans, the premium amount remains constant throughout the policy term, while the premium amount usually increases at the renewal time in the case of whole life insurance.

Also, policyholders will not get a refund of the premiums paid towards their term insurance plans in any case. In contrast, whole life plans offer premium payouts if an insured person survives the policy term.

Purpose of the Insurance

Term life insurance plan acts as a pure protection plan as it offers no additional benefits apart from the death benefit in case of a policyholder’s demise. On the other hand, whole life insurance plans can serve the purpose of both savings and protection with death and maturity benefits.

Cash Value

You don’t get any cash value in the case of a term insurance plan which means there will be no cash benefit if you are still alive on the completion of the policy term. Whole life offers cash value that builds over time at a fixed interest rate and is one of the crucial reasons that make this plan more expensive than term life insurance.

You can opt for a loan against the whole of life policy with the available cash value. If you die during the policy term without paying back the loan, the insurer will deduct the outstanding amount from the death benefit. In whole life insurance plans, the insurer invests the premium amount in different investment options. Policyholders get the profit on these investments as a bonus. With the dividend-paying whole life insurance plans, you can also stop paying premiums at some point. Doing so will convert your cash value to a paid-up policy.

Rider Options

When you choose a term insurance plan, you can enhance your coverage with multiple rider options by paying an additional premium. You can choose from the following rider options.

  1. Critical Illness Benefit Rider
  2. Accidental Death Benefit Rider
  3. Accidental Disability Rider
  4. Waiver of Premium on Critical Illness

In the case of whole life insurance plans, you don’t get the rider options to boost your existing coverage.

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