The growing unpredictability in life might have increased the scope for the growth of insurance products in India. According to a report, 65% of the Indian population purchases life insurance for their financial security against uncertainties. Due to the rise in the uncertainties, you might opt for different insurance products in the market. Although there are many insurance products such as endowment plans, money-back policies, and so on, term insurance and whole life policy can be the popular choices.
Before you purchase either of the two policies, let’s first understand the meaning of term insurance and a whole life policy in detail:
Term insurance can be a sub-subject of life insurance, which aims to protect your family financially in your absence. Years ago, a term plan would provide death benefits for a specific duration after your demise. However, many insurers have availed a smart term plan that can provide death benefits as well as survival benefits under a single plan today.
What is whole life insurance?
As the name suggests, a whole life policy is an insurance product, which can cover you until 99-100 years. Under whole-life insurance, your insurer can charge a premium either for a specific period or throughout the tenure of the policy. As a policyholder, you can choose the sum assured value, tenure, and so forth at the time of purchase.
While the primary aim of both these policies can be family protection, they might follow a different approach. Typically, term insurance and whole life insurance can offer different features, benefits, premiums, and so forth. Hence, it can be essential to understand the differences between these two policies before making a final purchase. Let’s go through the top five key differences, which can help you to understand how a term policy and whole life plan are separate from one another:
Term policy: Unlike a regular term plan, a smart term plan can provide financial coverage to your family after your death as well as provide survival benefits to you after the completion of the maturity period. Moreover, you can increase the coverage amount after reaching specific milestones such as getting married, having kids, etc.
Whole life policy: Under a whole life policy, you have the liberty to choose the coverage amount based on your financial requirements. However, you might not be able to increase the coverage value after a specific point in your life. Therefore, choose the coverage amount adequately since your family’s financial sustenance can depend on it.
Term policy: A term plan can be the most affordable form of insurance. Typically, a term plan can offer comprehensive coverage at a low premium. If you choose a smart term plan, your whole premium can be returned at the maturity date when you survive the policy. Use a term insurance calculator to know your premium amount.
Whole life policy: The premium can be relatively higher under a whole life insurance policy. If you want to purchase a whole life insurance policy, you should calculate the premium before purchasing a policy. As a policyholder, you should be able to afford the premium to avoid the termination of the whole life insurance in the future.
- Cash value
Term policy: Today, term insurance can allow you to lead a comfortable retirement period with the help of the survival benefits. Under term insurance, the monetary payout can help you to secure your family as well as manage your financial needs.
Whole life policy: Under whole life insurance, your money can be channeled towards the protection fund as well as other investment avenues. The cash value, which is built through premiums, can be used to obtain loans with low interest rates.
As highlighted above, term insurance and whole life policy are two different insurance products in many ways. However, the choice of selection can lie in your hands. Therefore, research about various options and select the right insurance plan based on your needs. Moreover, you should consult a financial expert if you are unable to decide which policy can match your requirements.