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Term Insurance vs Whole Life Insurance: What is the Difference?

Term insurance and whole life insurance are two common types of life insurance. Whole life insurance is a type of insurance that offers long life protection. It also has a cash value component that helps you to borrow money from the plan when needed. On the other hand, term term insurance gives you coverage for a set period. The nominee receives the plan benefit in case of your death types that aim at offering protection to the loved ones of the policyholders during unforeseen situations, such as illnesses or worse, death. Let’s understand the difference between term insurance and whole life insurance in this article.

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What is Term Insurance? 

Term insurance is the most affordable and convenient type of life insurance that only offers death benefit to the nominees of the policyholder after his/her unfortunate death. And if you survive/outlive the policy term, the insurance ends and there's no payout. Let’s understand this with the help of an example:

Sunil, a 32 year old non-smoking man, buys a term plan from Policybazaar to financially secure his family. He earns Rs. 12 Lakhs per annum and therefore, chooses a life cover of Rs. 1 Crore for a policy term of 30 years. He now pays a monthly premium of Rs. 1,143 and will continue paying it for another 30 years.

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₹75
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@ Starting from ₹ 12/day+

What is Whole Life Insurance? 

Whole Life Insurance is a kind of life insurance that provides coverage for the entire lifetime of the policyholder, i.e. for 99 or 100 years. It guarantees a death benefit to be paid to the nominees/beneficiaries upon the policyholder's death. This type of insurance offers lifelong protection and a savings element, making it suitable for long-term financial planning. Let’s understand this with the help of an example:

Sanjay, a 31 year old non-smoking man, buys a term plan from Policybazaar to financially secure his family. He earns Rs. 10 Lakhs per annum and therefore, chooses a life cover of Rs. 1 Crore for a policy term of 99 years. He now pays a monthly premium of Rs. 2,311 and will continue paying it until he is 99 years old or eventually dies during the policy term. This will ensure that he has secured his loved ones for a longer period of time.

Term Life vs Whole Life Term Life vs Whole Life

What Is The Difference Between Term Insurance & Whole Life Insurance?

Below mentioned parameters help to evaluate which life insurance plan is right for you as per your requirements: 

Parameters Term Insurance  Whole Life Insurance 
Premiums  The premium amount of a term insurance plan is comparatively lower than the whole life insurance plan  Premium amount remains constant throughout the tenure of a whole life insurance policy, unlike term insurance plans where they might get an increase at the renewal time. 
Tenure  A term insurance plan generally has certain policy tenure to avail plan benefits  Flexible tenures are offered till the life assured is 100 years. In this, the survival or maturity benefits are paid out once the life assured completes 100 years. 
Cash Value  In a term insurance plan, the amount of loan is subtracted from the SA as the insurance company accrues interest.  Premiums paid by the policyholder for a whole life insurance plan doubles up as an investment. An insurer can announce a bonus in case it makes proceeds and provides you a loan at viable rates of interest. Whole life policies allow you to invest savings while offering protection from future uncertainties. 

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.

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What is the Difference Between Are The Conditions To Consider Before Buying Term Insurance and or Whole Life Insurance? 

You can choose between Term Insurance and Whole Life Insurance keeping in mind the following conditions:

Term Insurance Whole Life Insurance
You want affordable coverage for a specific period, like when you have a mortgage or dependents. You want lifelong coverage and guaranteed death benefit for your entire life.
You need a higher death benefit for a lower premium cost. You value the cash value component, which grows over time and can be used for emergencies or opportunities.
You want simplicity and don't need a savings or investment component. You want a policy that can serve as part of your estate planning or inheritance for beneficiaries.
You have other investments or savings for long-term financial goals. You are comfortable paying higher premiums for the added benefits and lifelong coverage.
You prefer to invest and save money independently. You want a policy that offers more flexibility in accessing funds later in life.

How to Buy Term Insurance Plan Or Whole Life Insurance Plan From Policybazaar?

Below are the steps to buy Term Insurance Plan or Whole Life Insurance Plan from Policybazaar:

Step 1: Go to Policybazaar's term insurance page.

Step 2: Enter your name, gender, mobile number, and date of birth.

Step 3: Provide details about your annual income, occupation, education, and smoking habits.

Step 4: If you want to buy whole life insurance, choose the appropriate age (99 or 100 years) in the Policy Term option.

Step 5: Look at the available plans and choose the one that fits your needs best.

Step 6: Buy using your preferred payment method

Note: Know what is term insurance first and then buy a term plan for your loved ones.

Wrapping It Up!

When selecting between term insurance and whole life insurance, it's essential to consider your specific financial situation, future goals, and assess debts and loans. Therefore, it is advisable to precisely understand both types of insurance and also keep in mind your age and the purpose of purchasing the insurance. The decision ultimately depends on your long-term financial objectives, whether you prioritize lifelong coverage and the potential for building cash value or are content with temporary coverage at a more affordable cost. You can compare from among 15+ insurance companies in Policybazaar to make an informed decision on which plan to opt for.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.

FAQs

  • Q: What is term insurance, and how does it differ from whole life insurance?

    Ans:
    • Term insurance provides coverage for a specific term or period, while whole life insurance covers the insured's entire lifetime.
    • Term insurance offers a death benefit if the insured passes away during the term, but there is no payout if the insured outlives the policy.
    • Whole life insurance provides a guaranteed death benefit, and it also accumulates cash value over time, which term insurance does not.
  • Q: Can I access the cash value in a whole life insurance policy?

    Ans: Yes, you can access the cash value in a whole life policy through policy loans or withdrawals. Keep in mind that borrowing against the policy will reduce the death benefit, and unpaid loans can affect the policy's performance.
  • Q: Which policy is better for a young and healthy individual?

    Ans: Young and healthy individuals often find term insurance more appealing due to its lower premiums and sufficient coverage during their critical years.
  • Q: Can I cancel a whole life insurance policy if I change my mind?

    Ans: Yes, you can cancel a whole life insurance policy, but doing so may result in surrender charges and loss of accumulated cash value. It's essential to consider the implications before making a decision.
  • Q: What factors should I consider when choosing between term insurance and whole life insurance?

    Ans:
    • Consider the length of coverage needed: If you have specific financial obligations, like a mortgage or dependents, term insurance may be suitable. If you need lifelong protection, whole life insurance is a better fit.
    • Affordability: Term insurance usually has lower premiums, making it more affordable for short-term needs. Whole life insurance premiums are higher but remain level over time.
    • Cash value and savings component: If you desire a policy that builds cash value, whole life insurance is the right choice, whereas term insurance is solely for protection.

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