Categorized | Life Insurance

What Makes More Sense – Term or Whole Life?

While Term insurance would stand the obvious winner in terms of insurance cover and Maturity amount that you could get through other investment options, the attractiveness of whole life insurance depends on your own individual circumstances, your appetite for risks and on what you want to achieve at the end with your insurance policy.

The debate between Term Insurance and whole life in terms of life insurance has been on for many years, perhaps for as long as the history of life insurance itself. And it is important to know which one to take up and which one to drop, especially given the expanding body of knowledge in the field of insurance that lies in the public domain these days, since having the wrong Policy would mean considerable differences in terms of the value that you derive from your insurance policy. And the difference lies in whether you get any money back at the end of the term of your insurance policy or you only get insurance cover that gives you (or your family) the maturity amount or the sum Assured in the event of death of the policy holder.                                                                        

Whole Life Insurance

The typical conundrum is in terms of choosing among whole life insurance, term insurance or a combination of the two. For starters, you could take it for granted that whole life insurance is going to be much more expensive for you than term insurance, because whole life is not just about insurance cover, but also includes an investment and savings component to it. And typically, you would have to pay larger amounts of premiums in the initial stages that you buy your insurance policy in, where the larger amounts that you pay initially go towards investing your money and also towards providing for sales commissions of the agents involved. And, as expected, you would be eligible for a maturity amount as well, even as you outlive the duration of your insurance policy.

Term Insurance

The difference in case of term insurance is that this could be viewed as pure life insurance and nothing else. This does not have a savings component added on to the insurance policy and all it does is to provide you insurance cover for the term that you needed it. Since term insurance does not have an investment component, naturally, you would not have any maturity amount that goes with your insurance cover. And the premiums that you pay for your insurance policy would be far less in the case of term insurance than what it is in whole life insurance.

The Difference Between Term Insurance and Whole Life

The difference between Term insurance and whole life could be summarised as follows:
•Savings: Term insurance has no savings component involved; whole life insurance does.
•Premiums: Term insurance involves low premiums that may increase with time; whole life insurance starts off with high premiums
•Maturity amount: Term insurance does not involve a maturity amount if the policy holder survives the term of the insurance policy; whole life insurance provides a maturity amount at the end of the insurance cover.

What Makes More Sense – Term Insurance or Whole Life?

Now that we know the differences, the question remains. And the answer could well be term insurance as the ideal choice in life insurance, but for the clause that it really depends on a lot of factors, such as your age, the duration for which you have opted for life insurance, your health conditions and your unique sets of needs and circumstances.

The obvious answer is that you could go for term insurance and invest the difference in other savings and investment tools that might give you better returns. Thus, you could opt for a solution that provides the benefits of maturity amount as well as insurance cover, while you could go in for lower premium. However, the longer you have paid your premiums for whole life insurance, the more the case value would be that you could expect to reflect in the maturity amount.  That said, it is your individual choice if you need a maturity amount at all or if you are just looking at insurance cover, since you could get better returns if you invest the difference in other investment tools available. The choice, as always, is yours, depending on what you want out of your insurance policy.