Difference Between Term Insurance and Whole Life Insurance

Among the different life insurance policies, two popular ones are term life insurance and whole life insurance plans. Term insurance gets you coverage for a specific period. In case the insured person expires, the beneficiary receives the policy benefit. On the contrary, a whole life insurance plan provides life-long protection. 

If you are wondering about whole life insurance vs term life insurance policy and which one you should opt for, keep reading to learn more details.

Term insurance plans have been fairly popular among different life insurance policies. This is because the term plan provides financial security to an insured person's family in case of any unfortunate incident. It also comes with an affordable premium rate.

The plan provides life coverage to an insured person for an extended period based on the duration or ‘term’ opted for. The policyholder decides the assured sum when buying a term insurance plan.

As its name suggests, this insurance plan provides life-long coverage, which goes on throughout the validity of the plan. Therefore, choosing a whole life insurance plan protects your family financially during an unfortunate incident.

Apart from an insurance facility, this insurance plan also provides an investment benefit. Since a sufficient amount of money is collected in the form of premium payments, this plan enables you to use that money if you are in need.

Whole life insurance is much more expensive than term life insurance because it provides lifetime coverage and also funds. Whole life premiums are level and fixed to represent the insurance company's commitment toward issuing benefits throughout the policyholder's entire lifetime.

On the other hand, term life insurance has lower initial premiums. Hence, it is relatively cheaper, especially for the younger generation, but the renewal after the term expires may mean huge increases in premiums.

In the final analysis, though term life insurance may be cheaper in the short run, whole life represents a long-run investment to achieve financial security and wealth accumulation.

If you are wondering which is better, term or whole life insurance policy, it purely depends on your financial security needs and goals. Suppose you require life insurance for a considerably short term (while your objective is to nurture your minor children and provide them financial security). In that case, choosing term insurance will be a better choice as its premium is quite affordable.

On the other hand, if you want permanent coverage that will continue throughout your life, considering a whole life insurance plan is ideal. Whole-life policies also help you enjoy several survival benefits, like tax-free cash value accumulation.