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The ever-increasing uncertainties in life have made it important for people to purchase a life insurance policy to ensure financial stability and security of one’s family. The person can choose either term or whole life insurance . There are many points of distinctions between the two types, and opting for one of them must be done with careful considerations. The decision to choose the type of policy can be based on the following factors:
- Investment and maturity benefits: A person looking for a policy that will also act as an investment instrument should opt for whole life insurance. Term insurance only offers life cover for a specified tenure, after which there is no payout. Conversely, whole life insurance offers a decent amount of payout upon the end of maturity period if the policyholder survives the policy term. Since a part of the premium paid is invested by the company, the earned profits are paid back to the insured.
- Loan against policy: After a specified number of paid premiums, a policyholder is allowed to withdraw a proportionate amount of funds from a whole life insurance policy. The withdrawn amount is considered as a loan that must be repaid to prevent any loss in sum assured or cash value. No such loan benefit is available for term insurance policyholders.
- Tenure: Term insurance policy is active only for the specified period, and the policyholder will enjoy life cover only till the end of that tenure. Subsequently, no payout will be given until the policy tenure is extended. Whole life insurance lasts a lifetime until the policy is active.
- Lower premium: The premium paid for a specific amount of sum assured will be less in case of a term insurance policy as compared to whole life insurance. Premium amount is an important factor while deciding whether to buy term or whole life insurance.
- Bonus/loyalty benefits: Since a proportion of premium amount is invested by the company in the case of whole life insurance, the policyholder receives its profits in the form of bonus or loyalty amounts. No such benefits are offered under term insurance.
- Marital status: Term insurance is most suitable for unmarried people as they get a high sum assured at a low cost. Whole life insurance is an excellent choice for married people with children as this policy offers not only the life cover but also an option of withdrawal when needed.
In the end, choosing a life insurance policy or whole life insurance entirely depends upon your requirements. The Above factors would help you understand your needs and select the plan that would benefit you and your family in the long term.
DISCLAIMER
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.
