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  1. Whole life term insurance Vs Regular term life insurance: Which is better for you?

Whole life term insurance Vs Regular term life insurance: Which is better for you?

whole life term insurance provides a guaranteed payout to the dependants of the policyholder. In regular term insurance, there is no payout if the policyholder outlives the policy period.

In regular term plans, the policy period usually ranges up to 85 years of age.

A regular term insurance plan also called as a pure protection plan, provides death benefit or financial coverage to the nominee in case of an untimely death of the policyholder during the policy term, whereas a whole life term insurance plan covers you for the entire life. The only difference is that in a regular term plan, the coverage is limited up to the policy period (for e.g 70 years or 80 years), unlike the whole life term insurance plans where the coverage is extended till the lifetime of a policyholder. In regular term plans, the policy period usually ranges up to 85 years of age. There is no payout if the policyholder outlives the policy period.

But, whole life term insurance provides a guaranteed payout to the dependants of the policyholder and helps in the circumstances when there are unpaid loans or debts to be paid off so that there is no burden on the family members.

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For example, Mr Satish buys a term plan at the age of 30 for a period of 35 years, which means he has the coverage benefit till the age of 65 years. If he passes away at the age of 66, then there will be no payout to his dependants. If the similar scenario occurs with a whole life term insurance, then Mr Satish’s dependents will be paid the sum assured as a death benefit. The policy period can be of 99 years or 100 + years, depending upon the plan chosen by the policyholder.

So, whole life insurance is permanent insurance. It means that the insurance remains as long as you are paying the premiums. It guarantees the death benefits, as well as the premiums and no other insurance policy, has as many guarantees as a whole life insurance policy. Apart from building the cash value, the growth of your cash value is guaranteed. The cash value is the money that you have paid to the insurer which you are allowed to keep when you stop paying premiums. Unlike the term insurance plans, when you cancel a whole life policy, the cash value is returned to you.

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These are the advantages of a whole life insurance plan, but with more features, it does come with more complexities. Whole life has higher premiums than term life in early years, but unlike term policies where the premiums usually increase at the renewal time, whole life premiums remain the same. With the dividend-paying whole life policies, one can stop paying premiums at some point and convert the cash value to a “paid-up” policy. The cash values earned can pay the premiums of your whole life insurance policy.

The premiums for the whole life term insurance are way expensive than the term insurance. Moreover, the difference of the premium between term insurance and whole life insurance, if invested on your own, can generate more returns. Hence, investment savvy investors should opt for a plain vanilla term insurance and other investors shall opt for a whole life insurance.

ALSO READ: 10 facts about life insurance which you must know before buying one

Here is a table comparing the policy amount for a term insurance and whole life policy.

For a 30 yr old male, Non Smoker, Sum assured- 1 crore, Cover up to- 80 yrs
Company Name Plan Name Policy term (years) Pay term (years) Premium (annually)
HDFC Life Insurance Click 2 Protect 3D Plus- Life Option 50 50 Rs. 14626
Max Life Insurance Online Term Plus 50 50 Rs. 12744
Aegon Life Insurance iTerm Plus Insurance Plan 50 50 Rs. 11352
PNB MetLife Mera Term Plan 50 50 Rs. 11918
Source:Policybazaar.com
For a 30 yr old male, Non Smoker, Sum assured- 1 crore, Whole-life policy term
Company Name Plan Name Policy term (years) Pay Term (years) Premium (annually)
HDFC Life Insurance Click 2 Protect 3D Plus- Life Long Protection Option 69 45 Rs. 44344
Aegon Life Insurance iTerm Insurance Plan 70 70 Rs. 14778
PNB MetLife Mera Term Plan 69 69 Rs. 15812

Source: Policybazaar.com

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