Whole life and term life insurance – Choose the best fit for you

Life insurance plans are your security blanket for the future, in case something were to happen to you, they make sure that family is taken care of financially. Your life insurance plans can help fund your children’s education, help clear your debts and basically help your family get back on their feet in your absence.

When buying a life insurance policy one has many choices to choose from. The main contenders though are usually term life insurance and whole life insurance policies. Term insurance is insurance that is valid for a specific period of time and offers death benefit to the nominee in the event of the death of the insured. The premium for term insurance is low and is often the only factor that drives people to opt for term insurance. Whole life insurance on the other hand is exactly as the name suggests insurance that covers you throughout your life. Premium for this type of life insurance is higher than that in term life insurance. There is death benefit that is exempted from any taxes.

So which one is better for you? The answer lies in the following analysis.

Term life insurance is the simplest type of insurance. Here, your family is assured a pre-decided amount in case of a death, if it takes place within the term of the insurance. If the policy holder survives the term of the insurance, the insurer does not have to pay anyone. The lure of this type of insurance is the low premium.

Whole life insurance or permanent life insurance provides cover for the entire life of the policy holder or for a hundred years whichever’s earlier. In addition to that, the policy also calculates a bonus on the amount assured, which it then pays to a nominee after the death of the policy holder.

So what should you choose? It largely depends on your age and life situation. If you’re in your 20s or 30s and are just starting out in life, then term plans are right for you. These plans will offer you decent protection for reasonable premium payments. 

If you have a family to look after then you should for a mix of whole life insurance and term life insurance. You can do this by buying a term rider on top of the whole life policy. 

If you’re over 40 then you should opt for whole life insurance as the plan will provide cover all throughout your life, while effectively being cheaper than term plans.