Ch. 9: Whole Life Insurance vs Term Insurance

Life insurance is a financial safety net for your loved ones. It is one way to ensure your family has financial security, should something happen to you.

Now, when you set out to buy a life insurance cover for your family, you'll come across many types of policies, particularly the mention of Term Life Insurance policies.

Here’s a quick article so that you are clear how a Whole Life Insurance is different from a Term Life Insurance policy, before you make any decision.

Term Insurance

Term insurance is the most suitable type of life insurance there is. It is the most efficient way to protect your family’s financial future, in case you pass away before you create enough wealth for their needs. As long as you pay all your premiums on time, your family will receive a fixed sum of money, if the death happens during the “term” of the policy. At the same time, if you survive through the policy term this policy won’t pay any benefits. This is also why Term Life Insurance is so cheap and called a pure risk cover.

Whole Life Insurance

A whole life insurance plan is like term insurance, but with a guaranteed payout. It offers a cover for practically your entire lifetime, i.e. 99 or 100 years of age. In case you pass away, your family will receive the sum assured. But what if you survive? If you survive till 99 or 100 years of age, the sum assured is paid as a maturity benefit. Mostly, these plans are preferred by people who want to leave behind a legacy for their children.

Now that you have understood what term and whole life insurance policies can do for you, let’s delve deeper to understand the specific differences between both the plans so that you make complete sense of both these options.

So let’s compare!

Term vs Whole Life Insurance

	Whole Life Insurance	Term Insurance
Tenure	The policy covers you for your entire life.	The policy covers you for a fixed term.
Goal	The goal in a whole life insurance is to leave a legacy, or protect a family member who is dependent for a lifetime	The goal of a term life insurance policy is to protect family members till they are financially dependent on you.
Benefits	It offers guaranteed returns	It offers no additional benefits apart from the death benefit.
Cost	The premiums are expensive compared to pure term plans.	The premiums are considerably lower.
Maturity Benefit	You get a payout as a maturity benefit if you survive the entire policy term.	You don’t get anything back if you survive the policy term.
Cash Value	The policy may generate a cash value everytime you pay the policy premiums. You can use this to pay your future premiums or borrow money against it.	No cash value is generated under a pure term insurance policy.
Loan Provision	You can avail a loan against the policy after it has been in force for 3 years.	You cannot avail a loan against a term insurance policy.

Now that you're aware of how a whole life insurance policy differs from a term insurance policy, we're sure you'll be able to make an informed decision on which one to buy for your family's long-term financial security.