In today's world, almost every responsible family-oriented person wishes to protect his family from the vagaries of fate. But alas! There is no way to ensure that your family will always be kept away from tragedy. So while there is no mechanism to eliminate future tragedies, there is certainly a way to pre-empt its financial consequences. It is known as life insurance.
Every person today must take insurance to safeguard himself and his family at a time of rising financial volatility. Stress levels are increasing daily as workloads rise and responsibilities line up. All of this leads to illness and disease. Besides, one may meet with a freak accident and become unable to work. This event is extremely stressful for families that are dependent on the income of the one person who is now absent from their lives.
Thus, taking term insurance or life insurance is one of the best options to pursue. However, many potential customers are confused about the difference term insurance and whole life insurance. It is important to know the differences between the two.
- It is a fixed tenure life insurance policy. The term of the policy may be 10, 15, 20 or 30 years.
- Unlike simple life insurance, there is no maturity benefit attached to the term insurance plan. Thus, when the policy matures, the policy holder does not receive any corpus of money nor the premiums already paid.
- However, term plans have some of the highest sum assured amounts across all life insurance products today. Besides, their premiums are quite affordable as well.
- People with a modest income or those who have recently started working can opt for term insurance instead of more expensive policies.
- However, premiums are higher for people who have pre-existing diseases or who are older.
Many insurers encourage women to take term insurance by offering them lower premiums.
- The large corpus is passed on to the family when the policy holder passes away.
Whole life insurance features:
- The whole life insurance plan is applied for the applicant's entire lifetime. It builds a corpus steadily over the term of the policy.
- Once a sufficiently large corpus has been created, the policy holder may also borrow money against it.
- Those looking for long term life coverage should opt for whole life insurance. It has guaranteed death benefits. The policy holder's loved ones may use the plan corpus to meet their financial goals.
- Whole life insurance is more expensive than term insurance, since there is also a cash value component attached to it.
- Unlike term insurance, whole life insurance allows one to increase or decrease the premium payments at a later date.
- The premiums are higher if the applicant has a poor health profile, or is older than 35 years, and/or is a smoker and/or substance abuser, or works in a 'risky' or financially unstable profession.