Term Insurance vs. Whole Life Insurance: Which One Is Better for You?
Buying life insurance provides a financial shield to your close ones in case anything unfortunate happens to the main income earner of the family. It acts as a financial shield for your family so that they can continue to work towards their dreams even if you are not around. Life insurance can be confusing due to the various jargons. If you step out in the market, you will be baffled by the endless options available. Further in the article is a comparison between the two most popular types of life insurance – whole life and term life insurance, so that you can make a wise decision as per your needs.
What is a Term Plan?
Term insurance is the simplest form of life insurance at economical premium charges. It provides pure protection to your family members against any financial burden caused because of your untimely death. However, if you survive the term of the plan, you are not given any maturity benefit. There are also many riders offered which can be added to customize your own term plan.
What is a Whole Life Plan?
A whole life term plan is more of financial investment. It provides coverage throughout the life of the policyholder, therefore, in case of the demise of the insured, the family members receive the death benefit. Under such a plan, they accumulate bonuses or other additions throughout the life of the plan.
Term Life Insurance
A term life insurance policy is the apt choice for someone looking for pure protection against the loss of their income.
Pros of a Term Plan
- A low-cost solution to financially protect your loved ones.
- It acts as a replacement for your income in order to help your family in covering their daily expenses when you are not around.
- It helps in giving financial cover until a specific milestone of your life.
- It helps in paying off your outstanding debts.
Cons of a Term Plan
- It provides coverage only for a specified period of time.
- No maturity benefits if you survive the term of the plan.
- You can only recover your premiums if something unfortunate happens.
Whole Life Insurance
A whole life term plan is the ideal choice for someone who is looking for coverage beyond the basic need of providing a source of income when they are not around.
Pros of a Whole Life Insurance Policy
- This life cover lasts for an entire lifetime and does not have any expiry date.
- This type of life insurance provides protection and also pays you a maturity benefit.
Cons of a Whole Life Insurance Policy
- The premium charged on a whole life term plan is high, this may lead you to choose a lower life cover in order to afford it.
- The chances of you being under insured are high.
- It is not the ideal option for wealth creation if compared to the other investment options available in the market.
Comparison Between Whole Life and Term Life
For the better choice between whole life and term life, the conclusion can only be drawn after taking into consideration factors such as age, the intention behind opting for life insurance, etc. For someone who is young, the better choice can be taking a term life plan and later converting it into a whole life term plan, this helps in saving on the premium payments. However, this route should be taken only after being thorough about the term plan and with your insurance provider about the same. For someone who is elder, the whole life term plan is a good choice, as this not only provides coverage for the entire life but may also be more cost-effective.
Ideal Choice For You
The ideal choice for you depends on your needs and requirements. If you are someone who wants to keep the premium payments low and invest extra money in other investment vehicles, you can opt for a term plan. On the other hand, for someone who is looking for a life insurance plan that does not have any expiry date and wants to build the wealth over the years so that it can be used when the need arises, the whole life term plan is a good option.
The decision of which to purchase out of whole life and term life should depend entirely on your financial needs and aims. Life insurance is a financial vehicle that provides a lot of flexibility and power in meeting the various milestones in life.