5 min read
Updated on Apr 26, 2023
Mr. Iyer is a 58-year-old man, thinking of buying a life insurance policy, as he is soon to get into the senior citizenship club. He wants to safeguard his family’s future but he is confused which one to buy, a term life insurance or a whole life insurance plan? There are many people like Mr. Iyer who want to buy a life insurance plan, but can’t decide which one to buy? Such people must take time out for a thorough term vs. whole life insurance.
So, get ready for a complete term vs. whole life insurance in this post. We bet after reading the complete post, you and people like Mr. Iyer will be able to make the best decision for themselves on whether to buy a whole life insurance policy or a term insurance policy.
As the name suggests, a whole life insurance plan is a whole life or permanent life insurance plan. It is a plan that keeps you protected financially, and won’t expire as long as you are paying the premium payments. The best feature of a whole life insurance plan is that it offers cash value that can be used for arranging funds for your future needs. You can even take loans against the policy, and the loans will be completely tax-free. However, the income gained from the withdrawals will incur some income tax for sure.
When anyone talks about life insurance, he/she is most of the time talking about a term life insurance policy. The easiest to understand and offering amazing benefits like death benefits and additional riders, a term life insurance is the most popular type of life insurance policy. It can be bought for a short-term from 5 to 30 years, depending on your needs. This simple and fixed duration policy is quite affordable for a majority of people.
Now, comes the time to learn about the differences between the two types of life insurance with a one-to-one term vs. whole life insurance.
|Feature||Whole Life Insurance||Term Life Insurance|
|Coverage||Permanent life-long coverage||Short-Term Coverage of 5 to 30 years|
|Mandatory Health Check-Up||Yes||Needed in many cases, but may not be mandatory depending on the premium amount chosen|
|Cash Value||Cash value depends on the premium paid for the policy. One can avail a loan against the cash value of the policy||No cash value is offered and no chances of getting a survival benefit if the policy matures|
|Initial Premium||Higher than term life insurance plans||Very low|
|Long-Term Premium||Remains the same throughout the plan||Premium amount may increase with time|
|Tenure||Flexible tenures with options to choose a maturity date||Fixed tenure as chosen by the policyholder at the time of the policy purchase|
|Critical Illness Cover||More secure in terms of the growing age of the policyholder. It will help provide financial cover for critical illness||May not provide sufficient protection for critical illness owing to growing age. For the critical illness you may need to buy additional riders|
|Eligibility to get Company’s Dividends||Yes||No|
|Pros of Term Life Insurance||Cons of Term Life Insurance|
|Pros of Whole Life Insurance||Cons of Whole Life Insurance|
Now, comes the big question of whether to buy a term life insurance or a whole life insurance? Which one is better in term vs. whole life insurance? It actually depends on your needs and expectations. Varying on your needs, both plans can be good for you. Those looking for only short-term life insurance because they can’t afford to pay the life-long premiums must opt for term life insurance. Whereas, those who want to enjoy a whole life coverage, and have no financial restraints must opt for a whole life insurance policy.
Apart from using the term vs whole life insurance calculator there are several other factors to consider before buying a term or whole life insurance plan. Have a look:
Know More: Best Term Insurance Plans for Housewives
The crux of the matter is that buying a life insurance policy is a wise decision, especially if you are the sole bread-earner for your family. Both term insurance and whole life insurance have their own pros and cons. Offering more flexibility in terms of cash value, whole life insurance may look lucrative to many, but being a permanent and a life-long policy it may incur more expenses as compared to other life insurance policies. So, take an informed decision, which one to buy by first identifying your needs and capability to invest.
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Term life insurance offers coverage for a certain number of years, often 10, 20, or 30. If the policyholder dies during the term, the insurance company pays the selected beneficiaries a death benefit. Unless the insurance is renewed before the term expires, the policy expires and the coverage terminates.
Whole life insurance offers coverage for the policyholder's whole life. It combines a death benefit with a cash value savings component. The policyholder pays a premium, a portion of which is applied to the death benefit and the remainder to the cash value account.
The choice between term and whole life insurance depends on your individual needs and financial goals. Term life insurance is generally more affordable and provides coverage for a specific period, making it a good option for those who need coverage for a limited time or have a tight budget. Whole life insurance is more expensive, but it offers lifetime coverage and a savings component that can accumulate value over time.
Many term life insurance policies offer a conversion option that allows you to convert the policy to a whole life insurance policy without having to undergo a medical exam. This can be a convenient way to transition from a term policy to a permanent policy without having to re-qualify for coverage. However, the conversion may result in higher premiums.
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