A Comparative Study on Whole Life and Term Insurance in the UAE!

A Comparative Study on Whole Life and Term Insurance in the UAE!PolicybazaarAverage Rating / 5 ( reviews)
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Purchasing life insurance offers financial security to the dependents at the time when you won’t be there to take care of them.

In case of your unfortunate demise, your family can make use of the proceeds for covering the costs of the funeral, paying college fees of the kids, making mortgage payments, and other expenses.

There are 2 main kinds of life coverage- term and whole life insurance.

Term life insurance is comparatively easier in understanding and involves lesser costs than a comprehensive life insurance plan. However, it comes with an end date.

Whole life coverage plans are more complex and are costlier than term; however, they offer additional benefits too. It is the most popular form of life insurance.

Let us take a closer at these two insurances.

Explaining the Whole Life Plans

This type of life insurance is a complete package that offers flexibility in selecting sum assured, duration, and more. Furthermore, it provides maturity and survival benefits as per the policy documents. Under these policies, the collection of the premium is done for a particular tenure or throughout the policyholder’s life.

The resulting benefits involve the ability to borrow money from the provider at low-interest rates, receiving the lump sum amount as maturity or survival benefit, receiving segregated premium payouts, and more. In simple words, whole life policies are meant for providing coverage to the policyholder throughout their entire life.

Explaining Term Insurance

This category of life insurance offers cover for a specific duration and is designed to provide protection to your dependents if you pass away before the maturity of the policy. In case of the unfortunate demise of the policyholder within the term, their beneficiary will get the payout. No other value is included in the policy.

The term can be chosen while purchasing the policy, common terms being 10, 20, or 30 years. In the majority of the policies, the death benefit, and the premium or cost remain the same across the term.

While shopping for a term policy, keep the following two things in mind-

  • Purchase the policy amount your family would require when you would not be around to look after them. The payout may be able to become a replacement of your income and help your dependents make payment for the services that you take care of now.
  • Select the term plan, which is in correspondence with the years you will be making payment of the bills and want life coverage in case you pass away early.

Here is a comparison between term insurance and whole life insurance on the basis of the features.

Features of the Policy

Term Life Insurance

Whole Life Coverage

Choice in the length of the policy

Included

 

Not included

Premium usually remains the same

Included

Included

Lifelong coverage offered

Not included

Included

May be eligible for yearly dividends

Not included

Included

Low amount of premium

Included

Not included

Accumulating cash values

Not included

Included

Guaranteed amount of life insurance payout

Included

Included


What is the Ideal Choice?

If you are young and unmarried, probably in your 20s-30s, a term policy can be a suitable option for you. These plans offer decent financial protection at reasonable amount of premium. Moreover, if you have a critical health issue, term policy can be best for obtaining the highest benefits in a short duration of time.

In case you are married and have kids too, then a combination of term and whole life could be a great choice. This can be done by purchasing a term plan above your whole life plan. The whole life policy will offer you cash value, which you can use at various points in your life, while the term rider plan will help in protecting your beneficiaries with good monetary benefits.

Lastly, if you are above 40 years of age, the whole life policy is the best option available to you. This plan will offer coverage throughout lifetime. Moreover, it will be comparatively cheaper than term plans at this point of time in life. It will also give you the confidence that your family is left with a good heritance after your demise.

Over to You!

Term insurance and whole life insurance are two different kinds of products that serve different requirements of the policyholders. You must select the one that is suitable for your financial needs as well as future objectives.

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