Life can be very uncertain and insurance is a must-have to cover the risks of life. But an array of insurance products is sure to leave buyers confused about what is the ideal insurance product. To decide for self, you need to have sound knowledge of how both these insurance products function and what are their pros and cons.
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In this article, we will provide you with a clear picture of both the insurance products so that you can decide which insurance product is the best suited for your needs.
A term life insurance is the oldest and the most basic form of insurance. Previously term insurance singly ruled the Indian market but later insurance companies came up with alternatives to suit the insurance requirements of customers.
Term insurance is pure risk cover wherein policy buyers pay a premium for a fixed time period to avail of the benefits of the policy. If the insured passes away during this period, then the death benefit will be paid by the insurance company to the nominee of the policyholder.
One of the main disadvantages of term plans is that the insured is not paid any maturity benefit when the policy expires. Since these are pure risk coverage plans, beneficiaries are ensured high sum assured in return of a nominal premium amount. A term plan is one of the best ways to shield the uncertainties of life and safeguard your family’s finances.
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These insurance plans offer the advantage of insurance coverage along with some added benefits. It is a complete package that gives you the flexibility of choosing the tenure and the sum assured. In these policies, you need to pay premiums for certain tenure or throughout the life of the insured.
However, the insured is liable to get many benefits on whole life insurance plans. It works as an instrument to help you accumulate money during the life of the policy that will be paid out as a survival benefit. You can also withdraw or borrow a portion of the accumulated cash during the policy tenure. Essentially these policies are meant to extend insurance coverage throughout the life of the policyholder.
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Now that you have an idea of what these plans are and how they differ, you will surely want to compare the two to get an idea of which insurance product is better.
Firstly, you need to evaluate the short-term and long-term costs of term and whole life insurance policies based on factors like your age, the face value of the policy and health condition etc.
So when you compare the prices of both policies, a term plan seems to be a much cheaper option than whole life insurance plans. Term plans are convenient options for policy buyers who are in their 20s or 30s that helps shield life-risks at a lower insurance premium.
However, if you are purchasing a plan after you have attained the age of 40 or you are a married person with kids, a whole life insurance plan is the best choice for you. The plan will ensure coverage throughout your life while being cheaper than term plans at this stage of life. Additionally, you also get an opportunity to accumulate a handsome corpus over the life of the policy.
While choosing between a term life insurance and whole life insurance you need to keep the following things in mind:
You can own both whole life plans and term plan at the same time. A term plan is a must-have policy as it offers attractive death benefits at a nominal premium amount. People who already have a term plan in place can invest in a whole life plan to accrue additional money throughout the policy’s life and use it as a retirement corpus or leave it as an inheritance to kids.
Now that you know about both the insurance products, you can make informed decisions while purchasing an insurance plan for yourself. Your insurance agent can help you find the right insurance option for you as per your needs.
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