Whole term life insurance Vs Regular Term life insurance: Which is Better?

We can all agree that buying insurance is one of the best decisions that you can make when it comes to safeguarding yourself and your family from potentially catastrophic financial situations. A life insurance policy is a plan that pays an assured sum to the beneficiary if the policyholder passes away during the policy tenure.Now before you go ahead and buy a life insurance policy, you have two options before you. You can either buy a Whole Life Insurance plan or a Regular term insurance plan . Let us understand the difference between both of these plans and which might be the better option for you.

A whole life insurance policy is a policy that provides coverage for the entire duration of the policyholder’s life or upto 100 years. If the insured person passes away at any time, the beneficiary is paid the death benefit. Also Read: What is Term Insurance?

A regular term insurance policy provides coverage to the policyholder only until the specific term of the policy. Only when the insured person passes away during the policy term will the death benefit be paid to the beneficiary. Also, if the insured person survives the policy term, no maturity benefit is paid.For eg. If Mr. Mishra buys a whole life policy at 50 years of age, his life will be covered under the policy until his demise, after which his chosen nominee will receive the death benefit. If he survives till 100 years of age, the endowment maturity benefit will be paid out to him. However, if Mr. Mishra bought a term insurance with a 15 year term.

Policy Tenure

As the names themselves suggest, the policy tenure for the whole life policy lasts for the entire remaining life of the insured, whereas a term insurance plan lasts for the specified term of the policy, like 15 or 20 years.

Payout

A whole term insurance policy offers a guaranteed payout to the beneficiaries of the policy. Since the policy tenure is for the insured person’s whole life, the beneficiary will be guaranteed a death benefit when the insured person passes away.A term insurance plan, on the other hand, does not guarantee a payout because the policyholder may outlive the term of the policy. If the insured person survives the duration of the policy, the policy is deactivated and the policyholder does not receive any payout.

Premiums

Since a whole life policy offers coverage for a longer time, the premiums required for such a policy will be higher. The maturity benefit also results in a higher premium charged.A term insurance policy premium is quite low when compared to a whole life insurance because the policy term is short and there is no guaranteed payout. Also, the premiums charged for term insurance can increase over time whereas whole life insurance premiums remain fixed.

• Whole life insurance provides life cover for the whole life of the policyholder.
• Whole life insurance guarantees a payout.
• The premiums remain fixed for the entire tenure.
• There is an endowment maturity payment if the insured survives 100 years.

• The premiums for term insurance are more affordable than whole life insurance.
• It is ideal for short term coverage.
• Persons younger than 45 years are better suited to go for term plans.
• The assured sum in term plans is considerably higher than whole life insurance in similar premium segments.

There are a lot of differences between whole life and regular term insurance. As is evident from the above points, both have their own advantages and disadvantages. It is important to find out what your end goal is when it comes to buying insurance. Based on the key differences, you will be in the best position to judge which policy suits your needs.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.