Life insurance sector has been continually growing since last few years. Meanwhile, the insurance companies have introduced several plans according to the people’s needs and financial requirements. Savings and Investment plans were introduced to accrue sizeable returns from the investment along with life cover. Similarly, child plans, pension plans were presented. But the need for a comprehensive ‘life coverage’ is everlasting. Hence, the demand for whole life insurance and term plans has never been down since long ago.
People often get confused about regular life, i.e. whole life insurance and term policies. For those people who are new to different life insurance plans, here are three fundamental differences between whole life insurance and term plans.
Life Insurance Policy Tenure
The significant difference which is shown in the name itself of each of the plan is the policy tenure. Whole life insurance, as the name suggests, is designed to provide life cover throughout the life. Since the general life expectancy is 100 years, most of the insurance companies offer life coverage up to the age of 99 years. If the insured person completes 99 years of his age, the policy matures, and the maturity benefits are paid. In term plans, the insurance coverage is provided for a specified period, i.e. from five years to thirty years. If the life insured survives the policy tenure, no maturity or survival benefit is paid. In case of the unfortunate event of the demise of the insured person, both the policies offer death benefits.
Policy Premium Rates
The premium amount for term insurance is considerably lower than that of whole life policies. Again, it depends on the age and how likely you are to adopt several diseases. Since term plans are offered for a particular period, companies know that the claims made will be much lesser than that of overall revenue. On the other hand, whole life policies cover the insured person for the more extended period. The increasing age brings several illnesses, and you are more exposed to different diseases. Therefore, the premiums for whole life insurance are higher than term policies.
Life Coverage or Sum Assured
For the whole life insurance, the sum assured can be chosen higher if and only if you are able to pay higher premiums. The sum assured depends on the premiums you pay. Whereas, term insurance is the cash cow for insurance companies; thus, you get significantly high sum assured in term insurance at lesser premiums. Term policies are always considered to be better for the youngsters, who are on the threshold of their life and career.
In short, these three differences will help you decide which policy is apt for you. Considering all the future needs and financial conditions, you can choose your life insurance policy.