Differences Between Term Insurance and Whole Life Insurance Policy

What Is a Term Life Insurance Policy?

What Is a Whole Life Insurance Policy?

What Are the Key Differences Between Term and Whole Life Insurance Plans?

The major differences between term life insurance and whole life insurance policies are discussed in the table below:

Factors

Term Life Insurance Plan

Whole Life Insurance Plan

Premium

The premium for term life insurance plans is lower than whole life insurance.

Comparatively higher than term insurance plans.

Coverage Period

In general, the coverage period ranges between 10 years and 30 years.

It provides lifetime coverage.

Permanent Coverage

No permanent coverage is offered.

It offers permanent coverage.

Premium

Remains constant or increases sometimes.

Always remain constant.

Cash Value

No cash value is involved

Cash value is present, and it accumulates in due course of time.

Dividends

Term life insurance does not provide any dividends.

Depends on the insurance provider.

Health Exam

It is usually required but also depends on the insurance amount.

Yes, health examination is necessary for whole life insurance plans.

Favourability

It is favourable for someone who is opting for a short-term plan.

It will be suitable for someone looking for a long-term plan.

Use in Estate Planning

Not commonly used.

Used.

Bonuses

Term insurance plans do not provide any bonus.

In case of a whole life insurance plan, you will get bonuses.

What Term Life Vs Whole Life Insurance: Which One Is Better?

FAQs About Differences Between Term Insurance and Whole Life Insurance Policy

What are the key advantages of whole life insurance? up-arrow

Whole life insurance provides the following benefits:

  • Constant Premiums: The premium amount in this policy remains unchanged throughout the life of your insurance policy, despite your age or condition of health.
  • Death Benefits: The nominee receives the sum assured, also called the face amount of a policy, on the insured person's death.
  • Cash Value: The cash value of your policy will increase every year, which is tax-deferred. It also offers a loan facility. 

Is it possible to have multiple-term insurance policies? up-arrow

Yes, you can opt for several term insurance policies from a particular or different insurer simultaneously. This will help you gain financial coverage in the long term.

What is the ideal age to get whole life insurance? up-arrow

The premium of whole life insurance increases with your age. Therefore, buying it at a young age makes sense to keep your premium affordable throughout your life. In general, you can buy whole life insurance between 30 years and 60 years.

What are the benefits of term life insurance? up-arrow

Following are the advantages of term life insurance:

  • Minimum premium
  • No additional charges
  • Tax benefits
  • Rider benefits
  • Flexible