Have been thinking of buying life insurance? There is a wide variety of insurance plans in India. With so many options available, it becomes really hard to figure out which insurance would be the best for you. To make things simple, let’s take a look at two of the most popular insurance types — term insurance plans and whole life insurance.
Term Insurance Plan
Term plans are the most basic type of life insurance. It’s also the most affordable option available, making the benefits of the policy accessible to a wide stratum of individuals. Term insurance is valid for a predetermined period and provides financial protection to your family and dependents upon your death. You can avail of a comprehensive coverage sum with a lower premium, which is paid out to your nominee. Term insurance is a very cost-effective way of safeguarding your dependents’ future. You can use online term plan calculators to figure the best term insurances available in India.
Whole Life Insurance
Whole life insurance is a policy that offers you coverage for the entire lifetime, right until death. It offers the benefits of both life cover and regular bonus. You are supposed to pay a premium up to a given duration, which will insure you for your whole life. There are two types of whole life insurances available, participating and non-participating. The participating plan has a higher premium than the non-participating plan. But, it should be noted that whereas a participating plan offers regular dividends, a non-participating plan doesn’t provide any.
Key Differences between Life and Whole Life Insurance
- A term insurance plan lasts up to a specific time duration. For instance, you have a fixed tenure of ten, twenty, or thirty years whereas, whole life insurance lasts up to a full lifetime.
- The premium stays constant throughout the tenure of a whole life insurance plan. In a term plan, premiums increase when policies are renewed. However, premiums for whole life insurance are higher than the term plans.
- In whole life policies, you can receive a dividend, or have the potential to profit when your premiums are invested in different wealth creation avenues. This is not possible with a term plan.
- Your premiums are non-refundable in term life policies. In the case of whole life insurance, the premiums are paid out if you live beyond the chosen policy term.
- Whole life insurance offers scope for savings and life cover. Term insurance only offers death benefits.
Term insurance plans can best serve you if you want to provide financial protection to your family at lower costs. Moreover, if you have health problems, these plans offer good protection cost-effectively. If you want additional benefits like dividends and maturity benefits, you might consider whole life insurance. Also, a whole life insurance could be a better option if you have more responsibilities. Whichever you choose, make sure to understand the terms and conditions well beforehand, and know of exclusions.