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

A term insurance plan and whole life insurance plan is specifically designed to protect your family members during the event of unfortunate situations, such as in the case of a death, fatality, or an illness. The main difference is that term life insurance covers a fixed period for a lower amount of premiums while a whole life insurance plan provides lifelong cover (up to 100 years) with a high premium and includes a component of cash value that builds over time. Let’s understand the difference between term insurance and whole life insurance that helps you choose the plan that best fits your long term financial goals.

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What is Term Insurance?

Term insurance is a simple protection plan meant to support your family financially if something unexpected happens to you. It is mainly chosen by people who want insurance cover for a fixed period of time, not for their entire life. The plan offers a high life cover at a relatively affordable cost, so your family does not have to struggle financially in your absence.

Under this plan, the nominee can receive the full sum assured either as a lump sum, as a monthly income, or sometimes as a mix of both, depending on what was chosen at the time of buying the policy. If the policy term ends and you are alive, there is no cash payout under term plans. That part often surprises people, but it is how these plans work.

For 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. 813 and will continue paying it for another 30 years.

Term Plans

₹1
Crore

Life Cover

@ Starting from ₹ 13/day⁺

₹50
LAKH

Life Cover

@ Starting from ₹ 8/day⁺

₹75
LAKH

Life Cover

@ Starting from ₹ 12/day⁺

What is Whole Life Insurance?

Whole Life Insurance offers lifelong financial protection (usually up to 99 or 100 years along with a built-in savings component that goes on till the time policy is active. This whole life policy has a cash value. It pays a guaranteed death benefit to the nominee whenever the policyholder passes away, regardless of age. Premiums are higher than term plans but include both protection and an investment element that accumulates value over time.

For 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. 1,958 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.

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

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

Parameters	Term Insurance	Whole Life Insurance
Purpose	Pure protection for a limited time	Protection with a cash value component
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 it might increase at renewal.
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.
Payout	Offers only a death benefit in case you die during the policy term. No payout if you survive the policy term.	Offers a guaranteed death benefit and a maturity benefit (cash value)
Loan/Withdrawal	Cannot take loans or make early withdrawals	Can take loans against the savings component after a certain time

*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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Common Customer Queries Answered

What life insurance is better, whole life or term?

Term insurance is usually the better choice if you want affordable cover for a specific period, like until your home loan is cleared or your children are settled. It gives high coverage at a lower cost. Whole life insurance lasts for life and includes savings, but it is much more expensive.
Term vs. Whole Life Insurance: Key Differences Explained

Term insurance is taken for a fixed number of years and focuses only on protection at a lower premium. Whole life insurance provides cover for whole life (till 99/100 years of age) and also builds savings, which is why the premiums are slightly higher.
What is the difference between whole life and term life insurance?

The main difference is cost and duration. Term life insurance is cheaper and meant for temporary needs. Whole life insurance is lifelong, includes savings, and comes at a higher price.

What Are the Factors 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 prefer to keep things simple and are not looking for a savings or investment feature in your policy.	You are planning ahead and want a policy that can support your estate planning or leave behind an inheritance for your beneficiaries.
You already have other investments or savings in place for your long-term financial goals.	You are okay with paying higher premiums in exchange for lifelong coverage and added benefits.
You like the idea of keeping your insurance and investments separate.	You want a policy that gives you the option to access funds later in life if the need arises.

When to Choose Term Insurance or Life Insurance?

Term insurance is right for those who need high coverage at low premium rates to protect dependents for a fixed period like if their mortgage is unpaid or their children are young. The lower premium amount helps you to use the savings for other types of investment such as retirement accounts.

Whole Life Insurance is ideal for those who want lifelong insurance coverage and a guaranteed way to build corpus over time. It helps in wealth transferring to heirs or to fund future needs.

What Happens to Term Life Insurance Plan at the end of Policy Term?

When your term insurance plan ends, the plan coverage also terminates automatically. However, certain insurers may offer the option to convert few or all of your term insurance policy into a permanent life insurance plan.

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 your 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 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.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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What is Term Life Insurance

FAQs

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

Ans: To understand, what is term insurance and how it differs from whole life insurance, because both sound similar at first. The basic difference is simple. Term insurance gives coverage only for a specific number of years, while whole life insurance covers the insured for their entire lifetime. Term insurance pays a death benefit only if the life assured passes away during the term. If the person survives the term, there is no payout. Whole life insurance, on the other hand, gives a guaranteed death benefit and also builds cash value over time, which term insurance does not do.
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 insurance policy by taking a loan or making a withdrawal. But do remember, if you borrow from it, the death benefit can reduce, and if the loan is not repaid, it may affect the policy later.
Q: Which policy is better for a young and healthy individual?

Ans: For a young and healthy individual, term insurance usually feels like the better option because the premiums are lower and the coverage is enough during the years when financial responsibilities are the highest.
Q: Can I cancel a whole life insurance policy if I change my mind?

Ans: Yes, you can cancel a whole life insurance policy if you decide not to continue. But there can be surrender charges, and you might also lose part of the cash value built so far. That is why it is better to think calmly before cancelling.
Q: What factors should I consider when choosing between term insurance and whole life insurance?

Ans: A few practical things matter here. First is how long you actually need coverage. If your main worries are a home loan, children’s education, or family expenses, term insurance may be enough. If lifelong protection is what you want, whole life insurance fits better. Term insurance usually has lower premiums and feels lighter on the budget. Whole life insurance premiums are higher but stay level over time. Lastly, the cash value and savings component also matter.

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881

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Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana – 122001 | Registration No. 742, Valid till 09/06/2027, License category- Composite Broker Visitors are hereby informed that their information submitted on the website may be shared with insurers. Product information is authentic and solely based on the information received from the insurers.

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