Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid to the nominee specified in the policy.

Difference between Term and Whole Life Policies

Premium

  • Term insurance policies can be availed by paying lower premiums than whole life policies.
  • Premium is constant throughout the policy tenure in case of whole life plans, while term insurance policies employ dynamic premiums when the term of the policy is set to be renewed.
  • Premiums will not be refunded in any scenario in term insurance policies unless a genuine claim against death of the insured is made, in which case a hefty sum assured will be paid out. Whole life plans provide premium payouts in case the insured survives the policy tenure as selected while buying the policy.

Tenure

  • Term plans offer fixed tenures during the course of which the benefits of the policy are applicable. Whole life have flexible tenures usually applicable till the insured reaches 100 years. Benefits will be paid out when the insured turns 100.

Cash value

  • In case of whole life terms, the premiums paid by you are invested in your protection fund as well as in other investment avenues. If the insurer makes profit on these investments, they declare a bonus a part of which is given to you. Term insurance does not have this feature.
  • The cash value that is built through your premiums in whole life plans can be utilized to receive loans at low interest rates. The interest is collected and kept by the company while the base loan amount is deducted from your sum assured. This does not affect future premium amounts. Term plans do not provide this benefit.
  • Whole life plans act as both savings and protection plans while term insurance is a pure life insurance plan with no additional benefits apart from death benefits.

So, What Should You Choose?

Ideally, if you are an unmarried individual in your 20s or 30s, a term plan is the best option for you. These plans will offer you decent protection for reasonable premium payments. Also, if you have pressing health issues, term plans are ideally placed for getting the highest benefits in the short term.

If you are a married person with 2 kids, a mix of whole and term life represents a great choice. You can do this by buying a term rider on top of the whole life policy. On one hand, the whole life policy offers you cash value that can be used at various points of your life, while the term rider will protect your dependents with high monetary benefits.

So Overall, TERM Insurance is the way to go for working population to ensure their families are safe when they are not there !!!

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