Everyone wants to do as much as they can for their loved ones. But sometimes, inevitable tragedies occur like our death, and it leaves our closed ones unprotected. Insurance is a protection for that loss. It financially helps your family in case something bad happens to you. There are different kinds of insurance available for various purposes. One such insurance is life insurance.
Life insurance is a contract between an insurer and an insurance holder. In this, the insurer promises to pay a fixed amount of money after the death or at the end of a set period. The insurance holder has to pay a set premium to the insurer as part of the deal.
There are two types of life insurance available, namely, Term and Whole Life Insurance. Both of them have their pros and cons, which we will look into to decide which one is better for you.
Term Life Insurance
Term life insurance is the most common and is sometimes referred to as pure Life Insurance. Usually, people opt for term insurance in case of an obligation. For example, you have a child, and you want to secure his future till the time he can support himself.
This helps you remain calm that your family would not have to suffer financially if anything happens to you. Here is what term life insurance has to offer.
- It lasts for a fixed amount of time such as 10, 15, or 20 years.
- In case of death within the set period, the beneficiaries receive the promised amount.
- If the term expires before the holder’s death, then no benefit is received.
- It can be extended after the term-end.
- The premium cost is generally less.
- Premium is calculated based on age, health, and life expectancy.
- No savings component.
- It’s a simple process.
Whole Life Insurance
Whole life insurance lasts for the entire life of the holder. It comes under the category of permanent insurance and guarantees some sort of benefits regardless of time. It covers more benefits than term life insurance and is more secure. Here is what Whole life insurance offers.
- It lasts for the whole lifetime of the policyholder.
- It offers a guaranteed death benefit to the beneficiaries at the time of death.
- Premium costs are generally high.
- It offers savings components where you can build up cash.
- Cash can be withdrawn during your lifetime.
- The process can be complicated.
Term Vs Whole
Down below we have discussed some of the features of both these life insurance against each other. This will help you get a better idea of what both of them have to offer to decide for yourself.
- There is a choice in policy length in term insurance while whole life insurance is for life.
- Whole life insurance accumulates a part of the premium value as cash, while term insurance has no savings component.
- Whole life insurance offers lifelong coverage, while term insurance ends with no benefits.
- Premium rates usually stay the same for both terms. But in the case of a renewal of term insurance, a new premium is calculated.
- Whole life insurance may be entitled to annual dividends, but term life insurance does not support it.
- Life insurance payout is guaranteed for both if the necessary conditions are met.
- Term life insurance does not give out death benefits after the expiration of the insurance. In contrast, whole life insurance gives out guaranteed death benefits regardless of the time of death.
- Term life insurance offers low premiums, while whole life insurance premiums can cost many times greater than that of Term insurance.
- Term life insurance can be considered as a loss since it provides no investment or payout at the end of the term. It only acts as peace of mind if something were to happen to you during that term.
Who to Choose?
If you are still confused about whether to choose Term or Whole life insurance, we have discussed some situations below. You can compare and relate to them to help you get a clear idea of your decision.
You might want to choose Term Life Insurance if:
- You only want the policy to last for a certain time, such as childcare, family obligations, or education.
- You are looking for affordable insurance rates as term life insurance offers the lowest premiums.
- You want whole life insurance but cannot afford it at the moment. Many term life insurances can be transferred to permanent insurance after some time.
- You would rather like to invest your money elsewhere instead of an insurance policy.
You might want to choose Whole Life Insurance if:
- You are comfortably able to afford the high premiums. Whole life insurance may halt if you miss your payments.
- You want to leave a certain amount of money to your prodigies after your death so that they can pay off any remaining debts or mortgage loans.
- You have a person with a disability that you have to look after to provide lifelong security for them after your death.
- You are looking for life insurance that builds up a cash value that is guaranteed. Whole life insurance accumulates a part of your premium as savings, and you can take a loan against it.
This brings us to the end of Term Vs. Whole Life Insurance, and we hope that this helps you to figure out which is best for you. Both Term and Whole Life Insurance have their pros and cons, and it is up to you to decide which one is more suitable.
Term life insurance is chosen more due to its lower cost premium and a fixed term-end. However, whole life insurance offers more security, albeit being a bit hard to afford. Nevertheless, there is always an option to convert your term life insurance into a permanent one if you change your mind.
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