TAKE COVER IN THE SHADE
Whole life term insurance or a regular term life insurance, which one should you go for?
Fixed deposits may be one of the most popular investment products for risk-averse investors but fixed return investments are not entirely risk-free. Buying a suitable insurance product requires some research on your part to identify your needs and comparisons to find the best product. “The life insurance products available in the market are for different financial needs: term plan for income replacement, endowment plan for regular savings and corpus creation and unit linked insurance plan (ULIP) for wealth creation,” says Anirudh Jain, head, insurance, Centrum Group. When it comes to pure insurance products, people cannot decide between a whole life term plan and a regular one. The regular term plan is cheaper, but a whole life plan ensures protection for a longer tenure. To help you choose between the two, it is worthwhile to go through the nitty-gritty of both insurance products.
WHAT IS THE DIFFERENCE?
“A regular term life insurance is a pure protection plan and provides coverage up to the policy term period whereas whole-life insurance
covers the insured till the end of his lifetime and gives you a guaranteed payout,” explains Santosh Agarwal, associate director and cluster head, life insurance, policybazaar.com.
Whole life term insurance works as a legacy plan for the family where an Individual can leave behind the sum assured as a legacy for loved ones. Apart from the death benefit, there are maturity and survival benefits and the policy remains in force throughout the lifetime of the policyholder until the time they are paying the premium. If the policyholder outlives the policy, they are liable to receive the maturity benefit. The negative side of whole life policy includes expensive premiums and high fees and commissions. Terms and conditions are also likely to be convoluted.
On the other hand, a regular term life insurance plan’s positive points include low premium rate, tax benefit and option for a greater sum assured. You can easily buy a term plan as it is quite easy to understand. Term plans also have some drawbacks. Unlike whole life term policy, the regular term policy doesn’t allow any maturity benefits and its premiums may escalate in the future. Term plan also doesn’t help in capital buildup like a whole life policy.
YOUNG VS OLD AND RISK APPETITE
Vijay Kuppa, co-founder of Orowealth, suggests that “age factor, risk appetite, and financial objective must be considered while purchasing any insurance plan. The younger generation can buy term insurance for financial cover and then invest in other market avenues for wealth creation. People aged 40 and above should consider whole life insurance cover”. Experts say that everyone should buy term insurance cover as it is a pure protection plan with ‘death benefit’ for dependents. If you have liabilities and want a guaranteed payout, then whole-life insurance policy is the better bet.