The need and demand for insurance policies are rising significantly, primarily due to the ongoing Coronavirus (COVID-19) pandemic. Life insurance should be the first thing in your financial portfolio, as it plays a significant role in safeguarding your family’s financial future, especially during your absence. Therefore, it becomes extremely vital to purchase the right type of insurance plan from a reliable insurer.
As numerous insurers are providing various insurance plans selecting the correct provider and the appropriate policy becomes difficult. Among all the different insurance plans available in the market, it is recommended to invest in policies, like a term insurance policy and whole life insurance plan.
Let us understand the meaning of both the plans first before we compare their various features and terms.
What is term insurance?
If you are wondering about term insurance plan meaning, then let us explain it to you in a simple way. Term insurance is a pure insurance plan that offers high coverage at exceptionally affordable premiums. This policy is ideal for individuals who are looking for life coverage for a specific period. If the policyholder dies within the plan’s tenure, the nominee of the policy receives the death benefit from the insurer. However, if the policyholder outlives the policy term, then he/she will not receive any survival or maturity benefit.
What is a whole life insurance policy?
As the name suggests, the whole life insurance policy provides life cover throughout the policyholder’s lifetime. It offers life coverage and cash value that is earned through interest. The policyholder can use the cash value in case of any financial emergency. However, it is a loan thatshould be repaid by the policyholder. The death benefit and the cash value of the whole life insurance policy will be deducted if the policyholder cannot refund the borrowed amount.
Differences between termlifeinsuranceandwhole lifeinsurance
Here are a few aspects where we have compared these plans:
Premium: The premium of term life insurance is the cheapest out of all the types of insurance plans available in the market. On the other hand, the premium of a whole life insurance policy on the expensive side.
Suitable for: The term plans are ideal for looking for a pure life insurance product. On the contrary, whole life insurance is perfect for looking for life cover and long-term investment opportunities.
Partial withdrawal: Term life insurance does not allow partial withdrawal of funds. Whereas, with whole life insurance, you can withdraw the funds partially to meet your immediate financial needs.
Riders: Term insurance policy provides various riders (add-ons) that you can purchase to increase the scope of the policy. However, the riders will increase the cost of your premium but are worth the amount. On the other hand, there is no such option for riders in a whole life insurance plan.
Tenure:When it comes to term insurance plans, the policy’s maximum tenure has a limitation. It can be availed till approximately 80 years. On the contrary, whole life insurance, as the name suggests, does not have restrictions. The policyholder can reap the benefits of the policy until he/she is alive.
Now when you know the difference between a term policy and a whole life insurance plan, it is advisable to opt for a plan that suits your needs. Insurance is an investment. Therefore, it is essential that you consider your budget as well before investing. The premium should not burden you, as you will have to pay it throughout the policy’s tenure. Therefore, it becomes necessary to invest in a suitable plan according to your budget. Make sure that the insurance policy can fulfill your family’s financial aspirations.