Term insurance vs whole life policy: Know the differences

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The significance of insurance cannot be overstated in today’s world. It is one of the key instruments of good financial planning. Insurance companies are offering different types of life insurance plans. Among these, term insurance and whole life insurance offer most basic and comprehensive life insurance coverages respectively. Both plans are very popular in India. But which one is preferable? Simple coverage and low-cost premiums for a fixed tenure make term life insurance an easy option for many people.

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 specified 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.

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 can be offered as a collateral for taking loans.