It’s hard to get over the loss of a family member, but their financial obligations can be taken care of by something called “insurance,” and by “life or term insurance” in particular. Before getting insurance, knowing how term and whole life insurance differ from each other is essential. “Why” insurance is important is clear to many, but the “which” needs to be answered and understood.
What’s term insurance?
As the name suggests, term insurance is only suitable for a certain amount of time. It pays out a death benefit to the nominee if the insured passes away during that time. But if the policyholder lives through the insured period, the policy is useless because there is no maturity benefit. The advantage here is the low premium, which brings in a lot of buyers, many of whom are between 25 and 30 years old. But one should remember: term insurance costs keep going up as time goes on. Together, this and the “no maturity benefit” clause make the customer think about how the plan will help them in the long run.
What is permanent or whole life insurance?
Whole life insurance is insurance which lasts as long as you live. The premium is fixed, but it can be high. A death benefit and an income benefit are included (a cash account that is exempted from any taxes). Cash that has been saved up over time can be used or kept at the policyholder’s own choice. The money can even be used to pay for insurance premiums or put away for retirement. People over the age of 40 are encouraged to buy whole life insurance. People with spouses and children have more responsibilities, so they need both financial security and life insurance. Customers only worry about the high premium when they buy whole life insurance.
Term Insurance vs Whole Life Insurance:
Anyone over the age of 40 should think about getting permanent life insurance. But before buying the latter, they must make sure that they have
- Paid off all their debts.
- Don’t have a serious illness.
- Are financially stable.
- Have enough money for their children’s education and everything else.
You can also use a term insurance calculator to find out an estimate of how much the policy’s premium amount will be. Depending on your needs, there are certain ways to figure out which insurance plan is right for you:
|Parameters||Term Insurance||Whole-Life Insurance|
|Premiums||A term insurance plan’s premium amount is comparatively lesser than the whole life insurance plan.
|Unlike term insurance plans, where they may get an increase at the renewal time, the premium amount remains constant throughout the course of a whole life insurance policy.|
|Cash Value||In a term insurance plan, the amount of the loan is subtracted from the Sum assured as the interest is accrued by the insurance company.||The Premiums a policyholder pays for a whole life insurance plan double up as an investment. An insurer can announce a bonus if it proceeds and provides you with a loan at viable interest rates. Whole-life policies allow you to invest in savings while offering protection from future uncertainties.
|Tenure||A term insurance plan generally has specific policy tenure to avail the plan benefits. Tenures offered are flexible till the life assured is hundred years.||In this, the maturity or survival benefits are paid out after the completion of hundred years of the life assured.|
Which One to Pick?
If you are in your 20s or 30s and not married, a term insurance plan is a good choice for you. With a high sum assured, the premium will be lower if you buy it early. Also, if you have health problems right now, term insurance plans can give you good returns in a short amount of time. When you’re in your 30s and married, you must add a whole life plan rider to your current term plan. This gives you the cash value that comes with the insurance plan, as well as the financial benefits of the rider for your loved ones if you pass away. In your 40s, you should get a plan that covers your whole life. This plan covers you for the rest of your life and protects the future of your family after you pass away. So, keep the above things in mind as you choose the right plan.
Wrapping It Up!
Before you buy term insurance online or offline, or even whole life insurance online or offline, knowing what each type is and how it works is essential. These are subject to certain tax exemptions and deductions that vary depending on several factors like old/new tax regime, type of plan, etc. You should also think about your age and why you want the insurance.