Comparison: Term Insurance V/s Life Insurance Policy
Let us start with defining both the terms which will give us a basic understanding for the comparison.
Term Insurance: Term Insurance is a life insurance, which provides coverage at a fixed rate of payments for a limited period of time.
Whole Life Insurance: While in case of Whole Life Insurance, the Whole Life Insurance is a life insurance policy that remains in force for the insured’s whole life and requires premiums to be paid every year into the policy.
Let us see other points of difference between Term Insurance and Whole Life Insurance:
– Term Insurance is for a specific term while Whole Life Insurance is for the whole life; as the name suggests.
– Before buying Term Insurance or Whole Life Insurance, the age of the policy buyer should be kept in mind. If you are younger in age, you can buy Term Insurance which will give you a cover for a specific term. While once you have became of an older age or nearer to that you should opt for Whole Life Insurance.
– Compare surrender value provided by both Term Insurance and Whole Life Insurance, and choose the one providing the higher surrender value whenever you require withdrawing the same.
– Keep the liquidity concept in mind while selecting Term Insurance or Whole Life Insurance. Term Insurance attracts less of your money as compared to Whole Life Insurance, but if you want a Whole Life Insurance cover, scan the market and get the cheapest policy that will not hinder your liquidity.
– In case of Whole Insurance Policy, you have to choose the insurance company that is long lasting, with sound financial capabilities and best reviews since last 10 years as you pay for cover of whole life that may extend to many years. While in the case of term Insurance, you do not have to consider such matters as you get the cover for a specific period.
– A Whole Life Insurance cover extends upto 100 years or your life span, while the Term Insurance is for a specific period.
– A whole life insurance also serves as an investment, as the amount from premium which exceeds the amount that goes for the life insurance, is transferred to savings. In case when the policy m
atures before the death of a person, he receives the maturity value. While in case of term Insurance no maturity benefit are available. That means you cannot receive any money paid by you as a premium after the term of insurance expires.
– Let us understand the above with the help of an example: For example X gets a term cover for 7 Years and pay premium Rs.5000 every year with sum assured Rs.2,00,000. In case the 7 years are over, X will not receive anything from the insurance company. But if X dies during the period of 7 years under the cover of term insurance, his legal heirs will receive the sum assured of Rs. 2,00,000. While in case of Whole Life Insurance the insured gets the maturity value.
– In case of Whole life Insurance, when a person receives the maturity value during his life span, the saving part is taxable while if the same is provided to his legal hires than the same is tax free. While in case of Term Insurance there are no maturity benefits and so there is no tax.