Life insurance plans provide financial security for your family’s future in your absence. The death benefit will reduce the financial crisis in case of your unexpected demise. Insurers offer different life insurance plans to suffice individual financial needs. Term insurance plans and whole life insurance plans are among the most important life insurance plans that are predominantly chosen by a larger section of people. It provides varied benefits depending on the plan features. Understanding the difference between a term plan and a whole life plan will help you choose the best option.
Whole Life Plan vs Term Plan
| Whole Life Insurance Plans | Term Plans |
| A whole life insurance plan is a life insurance plan that provides the death benefit in case of your unexpected death at any time. Therefore, the risk is covered until death. | A term plan is a traditional life insurance plan that provides a lump sum death benefit in case of your unexpected demise during the defined policy term. |
| The whole life insurance plan is always active to help your nominee benefit financially. | The term plan is defined for a certain period and has to be active to receive the benefits. |
| A whole life insurance plan will accumulate a cash value that provides an option to receive a loan anytime during an emergency. However, it is a loan that requires repayment. Failing to repay can reduce the cash value going further. | Term plan does not hold a cash value. |
| Whole life insurance plans are available at an increased cost. Therefore, the premium is high. Therefore, it may not be an affordable option for many sections of people. | Term plan in India is the most affordable life insurance plan. It can provide a huge sum assured at an affordable premium rate. |
| It is suitable for people looking for a life cover and savings benefit during the longer term. | It is appropriate for a person seeking a life cover for a defined term. |
| Whole life insurance plans will have a higher premium initially. However, it will remain the same over the remaining policy tenure. | The premium for the term insurance plan might increase or decrease based on the plan and features. |
Which One to Purchase?
Term insurance plans and whole life insurance plans provide the death benefit to your family in case of your unexpected demise based on the policy conditions. Choosing the right plan should depend on your needs, income and affordability.
If you feel a family member can take the financial commitments after a certain period, you can purchase the term insurance plan for the term period until then. On the other hand, if you are the sole earning member and have your dependent family travelling through your life until death, the whole life insurance plan will prove beneficial.
Term insurance plans become highly affordable when you start early and choose a longer-term. You can buy term insurance online and also utilise the varied, flexible features to customise it based on your demands.
For example, the Tata AIA term plan premium can be utilised to ensure comprehensive coverage based on illnesses such as cancer, heart condition, etc., and hospitalisation or other medical expenses. In addition, term plans can also serve as a financial product for the savings benefit when you opt for the return of premium option. However, the cost might increase to a certain degree.
Whole life insurance plans can provide the death benefit and additionally the increased cash value that accumulates over time. Therefore, it will be ideal for people looking for a comprehensive life cover and savings benefit.
Conclusion
Term insurance plans and whole life insurance plans provide the designated life cover based on the policy conditions. A term plan can provide a huge sum assured at an affordable premium rate for a certain policy tenure. On the other hand, the whole life insurance will provide a death benefit in case of your unexpected demise at any time of your death. It also has a cash value that you can borrow for an emergency. Based on your income, affordability and requirements, you can decide between the two to ensure financial security.
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