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Term Vs Whole Life insurance

Purchasing a term insurance plan provides financial independence to the family of the policyholder in case of an unfortunate event. A term insurance plan works as a financial safety net for the family of the insured. With a wide range of term insurance plans available in the market, it often becomes confusing for buyers to zero in on a plan.  To help our customers choose the best plan, here we have elaborately discussed the difference between whole life insurance and term insurance plan.

What is Term Insurance Plan?

Term insurance is the most affordable type of life insurance plan. A term insurance plan is specifically designed to provide death coverage to the family of the policyholder in case of an unfortunate event. A term insurance plan provides coverage for a specific time period and does not provide any maturity benefit.

What Is a Whole Life Insurance Plan?

A whole life insurance plan is a specifically designed insurance product that provides life coverage up to 100 years of age to the policyholder.  Under this plan death benefit is provided to the beneficiary of the policy along with any accumulated bonus or guaranteed addition bonus or loyalty bonus for the entire policy tenure in case of the decease of the insurance holder. This plan is a good option for investment for individuals who want to plan their retirement.

Pros and Cons of Term Insurance and Whole Life Insurance

Term Insurance Whole Life Insurance
Pros Pros
  • Provides higher insurance coverage at a minimum premium rate.
  • Take care of the liabilities and debts of the family in case of the absence of the breadwinner of the family.
  • Offers rider benefits to the policyholder.
  • The plan works as an income replacement in the event of the death of the policyholder. 
  • The policy can be purchased online in a simple and hassle-free way.
  • Provides life coverage for the entire lifetime of the policyholder.
  • The plan works as a financial backup in case of any emergency.
  • Take care of the liabilities and debts of the family in case of the absence of the breadwinner of the family.
  • Along with the death benefit, the plan also offers bonus benefits as an accumulated bonus or guaranteed addition bonus or loyalty bonus.
  • The whole life insurance plan also offers the facility to take a loan.
  • The policy can be purchased online in a simple and hassle-free way.
Cons Cons
  • Provides life cover only for a specific time period.
  • No maturity benefit is paid in case of survival of the policyholder during the entire tenure of the policy.
  • The claim can only be made in case of the demise of the insurance holder.
  • As compared to a pure term insurance plan, the whole life insurance provides a higher premium rate.
  • There are high chances of being underinsured.
  • As compared to other investment options, whole life insurance is not a very good option for wealth creation. 

Which is a Better Option of Investment?

Well, the answer totally depends on the choices and requirements of the insurance buyer. If a person wants to buy insurance coverage at a young age with a low premium rate than he/she should consider investing in a term insurance plan. However, if an individual wants to create a financial cushion for the future and wants to be covered for a lifetime, then they should consider investing in a whole life insurance plan.

Written By: PolicyBazaar - Updated: 08 October 2020
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Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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