As far as investment in insurance is concerned, out of 127 billion dollars in the Insurance market of India 97 billion went into life insurance policies. Life insurance contributes to 76% of the Indian Insurance Market. Life insurance policies is one of the most critical elements of a financial plan.
Awareness about life insurance has increased in recent years through TV advertisements and print media. While choosing life insurance, the decision narrows down to choosing between whole life and term life insurance, and it becomes important to know the difference between whole life and term life insurance.
People buy life insurance to secure their family’s future and protect them against unexpected financial burdens. Everyone has different requirements and is in various stages of life with different financial conditions. At this moment, choosing a life insurance certainly becomes a very subjective matter for all.
There is a difference between whole life and term life insurance. They both come up with a certain set of unique benefits. So, to choose the best option for yourself you require a complete knowledge of the two. Let us learn about the difference between whole life and term life insurance in detail.
What is the Difference Between Whole Life and Term Life Insurance in Tabular Form?
The table below displays the difference between whole life and term life insurance. The comparison is based on a few basic parameters.
The term life insurance and whole life insurance differences are stated in the table above. This gives an introduction to both whole life and term life insurance. To make the best choice for yourself, you need access to your financial requirements and to analyze the policies. Let us learn about the whole life and term life insurance in detail so that we can make a wise decision while buying.
What are term and whole life insurance?
The term life insurance and whole life insurance are the two types of Life insurance. The sole purpose of both of them is to provide financial security and protection to the policyholder’s family in case of the death of the policyholder under certain circumstances.
What is Whole Life Insurance?
The whole life insurance is a legal contract between the policyholder and the insurance agency where the insurance company agrees to pay a certain amount depending on certain parameters to the nominated people (known as beneficiaries) upon the death of the policyholder.
The whole life insurance provides the facility of cash value that enables the policyholder to grow his wealth over time. The whole insurance not only provides a payout when the policyholder passes away. You also have the option to withdraw it as a life insurance loan even when you are alive.
What is Term Life Insurance?
The term life insurance is another type of life insurance, it is a kind of legal contract between the insurance company and the policyholder where if the policyholder dies before a certain period such as 10,20, or 30 years then the insurance company pays a certain predetermined coverage amount to the policyholder’s beneficiaries.
The term life insurance does not provide additional benefits like the growth of cash value, but it is more affordable than the other plans. It can be used for strategic financial planning so that in case the primary earner of the family dies, the family does not experience any financial crisis.
What are the Reasons to Consider Term Life Insurance over Whole Life Insurance?
If the following reasons match your requirements, then you must consider buying term life insurance over whole life insurance.
- You need cost-effective life coverage
The premiums for term life insurance are usually lower than whole insurance. It is easier to fit the expense of term life insurance in your budget.
- You need life coverage only for a certain period
Many people consider term life insurance only for the time when they have a lot of family responsibilities like their children’s education and loans. Term life insurance would be an exact fit for them.
- You want to have an additional protection
As mentioned earlier, term life insurance helps settle large debts. It can be an additional policy alongside whole life insurance so that after paying debts, there is an amount left for other expenses.
- You may want to consider whole life insurance later
Many term life insurance provides convertible plans. If you can not afford whole life insurance, you can go for these plans, and then in the future, when your finances allow, you convert it to the whole life insurance plan.
What are the Reasons to Consider Whole Life Insurance over Term Life Insurance?
Whole life insurance has its own set of benefits over term life insurance. Here are some some to consider.
- You might need an insurance policy that ensures lifelong coverage
Unlike term life insurance, it provides coverage for the entire life. It becomes important if you are thinking of end-of-life planning, as it would cover the funeral expenses or leave an inheritance for your children.
- You want to grow the money invested in insurance
The amount accumulated as a cash component grows at a fixed rate that could benefit retirement planning.
Should Older People Buy Term or Whole Life Insurance?
You may now ask whether older people should buy term life insurance or whole life insurance. People in the later stage of their life should consider term life insurance as, at their age, they would need to grow their investments. Rather, their focus would be more on having protection. Their need is short-term, and if their children and other dependents are settled and can take care of themselves, then the term life insurance becomes the best option.
India's Insurance Life insurance market is expected to grow 12% CAGR between 2023 and 2027. But still, there is a lot of space in the market. Being the second largest population in the world and still contributing 3.23% of the global market is a very low number.
People should realize the importance of these financial products and buy them according to their to safeguard their plans from derailing. The difference between whole life and term life insurance does not fade the fact that their sole motive is to provide financial assistance in a crisis. So, you must have at least one of them.
