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The significance of insurance cannot be overstated in today’s world, especially after the pandemic. But which one is preferable – term insurance or whole life insurance plan?
Simple coverage and low-cost premiums for a fixed tenure make term life insurance an easy option for many people. It is also becoming quite popular due to this feature.
However, for those who want a lifelong life insurance option with other benefits, whole life insurance is one of the best investment avenues for them.
Take a look at other basic differences between these two types of plans.
Benefits
Term insurance plan is generally a pure life insurance plan. It offers only death benefits for the insured person and there is no other benefit.
If the person remains alive after during the tenure, he/she gets no returns for the amount paid as premium.
On the other hand, a whole life insurance policy offers multiple benefits. It offers life insurance as well as savings or investment options during the period of the plan.
Tenure
Term life insurance plan offers financial protection of the insurer for a limited tenure. A term policy only covers for a period, such as 10, 20 or 30 years.
But whole life insurance provides lifelong insurance policy until you turn 100.
Premium
The premium of term life insurance is low. For example, a 25-year-old person can get a life cover of Rs 1 crore for 25 years at a premium of about Rs 500 per month.
But a whole life insurance plan is more expensive than term life insurance. “On an average the premium for whole life insurance would be 1.5 to 2 times higher than that for a term insurance,” said Debasish Dutta, LIC agent and member of the Million Dollar Round Table, a select club of agents delivering very high volume of insurance business.
Loan facility
Loan facility is not available on term life insurance plans. The buyer of the insurance cannot take money by pledging the term insurance policy bond.
On the other hand, a whole life insurance policy offers loans at low interest. It also does not affect the future premium amounts.