Term vs. Whole Life Insurance: Which is Right for You?

What is Whole Life Insurance?

If you are looking for a life insurance plan with no expiry, whole life insurance is the solution. It is a life insurance product that covers your life until death. There is no fixed tenure for a whole life insurance product like a term plan. However, if you stop paying the premium, the policy may be terminated.

Whole life insurance may also offer a cash value component. It refers to a part of the life insurance premium that is used for savings purposes. The fund gets accumulated over years, which the policyholder can access for personal use or to borrow a loan against it. Since whole life insurance has both a savings element and life cover, the premium is likely to be higher than that of term insurance.

Pros and Cons of Term Insurance Plans:

A term insurance policy has certain advantages and limitations. To choose from the two, learning about both pros and cons is important.

Pros of Term Insurance

• Term insurance has an affordable premium since it does not have a savings element
• The plan is quite easy and simple to understand, even for a first-time buyer
• You are free to choose a tenure of your preference
• You can avail of the following tax benefits under the Income Tax Act of 1961:

Cons of Term Insurance

• The plan has no savings element and only life cover
• The policy has a limited tenure
• The renewal of the policy may have an increased premium

Pros and Cons of Whole Life Insurance:

Whole life insurance is one of the most sought-after products. To understand more about it, let's focus on both the pros and cons of the policy.

Pros of Whole Life Insurance

• You get a life insurance policy for life and not for a limited tenure
• The policy offers the feature of cash value that lets you save and use the amount for essential purposes. You may also take out a loan against the savings
• The premium remains unchanged through the policy tenure
• You get tax benefits under the Income Tax Act of 1961:

Cons of Whole Life Insurance

• The premium may be higher than term insurance
• It may take some time to completely understand the policy due to multiple benefits
• The rate of returns may be lower than various other investment and savings tools
• If you terminate the policy, there may be certain surrendering charges applicable

Term Insurance Vs. Whole Life Insurance: Which is Better?

Now that you have learnt about whole life insurance and term insurance, which one is suitable for you? Before you make a decision, here are three important questions that you must ask yourself to choose your ideal life insurance policy:

What is Your Budget?

The very basic consideration is your budget. You need to decide on a budget and try to stick to it. If you have a higher budget, you may be able to afford whole-life insurance without much hassle. However, if you have a tight budget, term insurance may be the better choice.

What are Your Requirements?

What are you expecting from the policy? If you want both life cover and savings, whole life insurance is the one. However, if you only want life cover for a specific tenure, term insurance can be the right choice.

Are You Planning for Retirement?

Anyone who wants to build a corpus for their retirement age may choose whole life insurance. The feature of cash value adds to the benefits of the policy, making it a meaningful choice. However, it also increases the premium.

Note: In some cases, you may convert your term insurance into whole life insurance. These are termed convertible term insurance plans. Make sure to check the same with your insurance provider.

Conclusion

Life insurance has become one of the essential purchases. The uncertainties of life and the growing need for financial security make it a vital product, especially for families with a single earner. Whole life insurance and term insurance are two popular products. The choice you make has to depend on your financial goals, current ongoing expenses, and budget.

At Jio Insurance Broking, we simplify the process of purchasing life insurance for you. All you need to do is choose, compare, and purchase your ideal life insurance policy. For more details, connect with us today!