Comparing whole life insurance with term life insurance

Business News | 20 Aug |

In the present world that we live in, almost every responsible person who is family-oriented wants to protect his or her family from the uncertainties of life. However, there is no definite way of making sure that your family stays safe from the tragedies in life. Hence, although as such there isn’t any mechanism for eliminating tragedies that may happen in the future, surely there is a way for pre-empting its financial results. Commonly, it is called life insurance.

Every individual these days should get a life cover for safeguarding himself or herself and their family during increasing financial volatility. The level of stress keeps rising every day as the workloads increase and your duties line up.

These things lead to diseases and illnesses. Other than that, an individual may end up meeting an accident and become physically or mentally incapable to work. Such an event is very stressful for the family that is dependent on the individual and his or her income, which is now not present in their life.

Therefore, it is very important to secure your life with insurance. Hands down, it is amongst the best options to go ahead with. But many of the policy seekers are confused about the difference between a whole life insurance policy and a term insurance plan. You can check out insurance and estates if you are looking for an insurance policy.

Here we have the two based on their features for helping you in understanding what would be the best in your case.

Features and Benefits of a Term Insurance Policy

• This policy includes a fixed tenure for the insurance agreement.

• Opposite to the simple life policy, a term plan generally does not offer a maturity benefit to the policyholders. But some of the insurance providers have begun to offer term insurance policies with the facility of return of premium which is paid at the time of maturity if the insured person survives the policy.

• These policies offer some of the highest amounts of sum assured throughout all different types of life covers available in the UAE market these days. Moreover, the premium amount is also pretty economical.

• The premium amounts remain higher for those people who have a pre-existing condition or who are in their old age.

• There are many insurance providers that encourage women to buy a term policy by giving them lower premium amounts.

• In case the policyholder dies, the large amount is paid to the nominee(s).

Features and Benefits of a Whole Life Insurance Policy

A whole life plan is applicable for the entire lifetime of the applicants. It steadily builds a corpus over the tenure of the plan.

After a sufficiently huge corpus has been collected, the policyholders can also apply for a loan against it.

The people who are looking for a long term life cover must buy a whole life policy. It includes a guaranteed death benefit. The loved ones of the policyholders can make use of the policy corpus for meeting their financial objectives.

This type of life cover is comparatively more expensive as opposed to term insurance because it also includes the component of the cash value in it.

Opposite to a term plan, a whole life insurance policy lets you decrease or increase the premium amounts at some date later.

The amount of premiums are higher in case the applicants have a bad health profile, is a smoker, is a substance abuser, or has a financially unstable or risky job or profession.

For instance, Mr. X purchases a term policy when he was 30 years old for 35 years. This means that he can enjoy the coverage benefit until he turns 65 years old. In case he passes away when he is 66 years old, then there will not be any payout given to his nominee(s).

If the same thing happens with whole life insurance, then the dependents of Mr. X will receive the death benefit from the insurance provider, which is the sum assured amount. The period of the policy can be 99 years or more than 100 years based on the plan selected by the policyholder.

Therefore, a whole life plan is permanent insurance. This means that the insurance policy remains with you until you make payment of the premiums. It ensures that the dependents receive the death benefits along with premiums. None of the other life cover plans include as many guarantees as a whole life plan.  Other than the cash value, the policy also guarantees the growth of the cash value.

For those who do not know, the cash value is the amount, which you paid to your insurance provider and you can keep even after you stop the premium payments. On cancelling a whole life insurance policy, you will receive the cash value, which is not the case in a term insurance policy.

Now, that we have discussed the pros of a whole life cover, you need to know that with more benefits and features there will be more complexities. As opposed to a term life plan, the whole life policy will charge higher premiums in the early years. However, in the case of term plans, the premiums generally rise at the time of renewal while the premium on the whole life policy will remain the same.

In case of the whole life cover that pays dividends, you can stop making the premium payments after a point of time and convert your cash value into a “paid-up” plan. The earned cash value can make payment of the premiums of the whole life insurance plan.

The premium charged on whole life policies is way more expensive as opposed to a term insurance plan. Additionally, the difference of the insurance premium between whole life plan and term plan, in case you invest it yourself, may earn you more returns. Therefore, those experienced investors can opt for a simple term insurance plan while other investors can go for a whole life plan.

Over to You!

Life insurance policies find a place in each aspect of our lives and give us and our family financial security. Now, whether to choose a term plan or a whole life plan is dependent upon your needs and your budget. Research well and choose wisely!

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