Which is Best? Term Insurance or Regular Term Plan?
June 18, 2019
Looking for life insurance? Confused about whether you should go for a regular term plan or a whole life term insurance? Check out this post to understand the differences and make the right selection
The world of life insurance has grown by leaps and bounds in the last couple of decades. There are now many different types of insurance products to perfectly match the needs of every customer. While whole life term insurance has been a very popular option in India, in the past few years, an increasing number of people are opting for regular term insurance plans. Let us have a look at some of the most significant differences between the two to help you decide.
1. Meaning of Whole Life Term Insurance
As the name suggests, whole life term insurance insures you for life. In case of your demise, the nominee will receive the death benefit. On the other hand, a term plan is only for a fixed period or ‘term’ of say 5 years or 10 years.
The nominee will only receive the death benefit in case of the untimely death of the policyholder within the policy term. No death benefit is paid in case the policyholder dies after the expiry of the policy. However, most insurance providers do allow you to extend the term of the plan by paying an additional premium.
2. Premiums Payment
One of the biggest benefits of term insurance plans is that their premiums are lower as compared to whole life insurance. As the policy only remains valid for a fixed duration, the premiums are considerably lower than whole life insurance.
However, with most of the popular term plans, the premium increases with age. This is the reason why it is said that one should purchase a term plan as early in life as possible.
3. Cash Value
A term plan is a very basic type of life insurance which covers your life only during the policy term. It does not offer any kind of cash value. Whole life insurance is very different in this regard. A whole life policy will not only offer a death benefit, but there is also a guaranteed payout after a fixed duration even if the policyholder is alive.
This guaranteed payout can be very helpful in repaying loans or medical expenses. Moreover, there are now different types of whole life insurance policies available with many different types of payout options. Whole life policies are known to have a cash value while even the best term insurance plan does not.
4. Additional Riders
Insurance providers now also offer a host of additional riders or add-ons with insurance policies. While these riders slightly increase the premium amount, they offer valuable benefits. Fortunately, such riders are now available with term plans as well as with whole life term plans. Some of the most popular riders are critical illness benefit, accidental death benefit, terminal illness benefit and permanent disability benefit.
5. Ideal For?
As term plans have a lower premium with a high death benefit, the plans are a smart choice for someone in their 20s or 30s. The high premium of whole life insurance is often a reason for people in this age group to not purchase insurance. On the other side, the affordable premiums of best term insurance make them a budget-friendly option.
However, if you are in your late 30s or 40s, whole life insurance is a better choice. People in this age group generally have more responsibilities with regards to their families. In such cases, the life cover and financial security of whole life insurance can be very useful.
Making the Right Decision
As you can see, there are benefits of purchasing a regular term plan as well as whole life insurance. The decision ultimately depends on what you are looking for and what you believe would be a better option for the financial security of your family.
To make the decision easier, you can also use an online term insurance calculator. Go through posts on official websites of reputed insurance providers to understand the benefits of both types of policies and select one that best suits your needs.
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