Last Updated on February 6, 2020 by Gopal Gidwani
The uncertainty of life can take a toll on every member of your family. There can be an incident such as death within the family, loss of income, critical illness, and so on at any given point of your life due to the growing unpredictability. While you might not be able to predict any unfortunate event, you can keep your loved ones prepared financially to tackle the unannounced emergency.
Life insurance products have been introduced in the market to provide you with financial support during a crisis. Although all life insurance companies offer various life insurance plans for your financial security, term insurance, and whole life insurance still remain the favourites. The main idea behind term policy and whole life insurance can be to cover your loved ones against the eventualities of life. Therefore, you might find it difficult to choose between either a term policy or a whole life insurance.
To avoid confusion between a term policy and whole life insurance, let’s first try to understand the meaning of these two policies in detail.
What is term insurance?
As the name suggests, a term policy can offer financial protection for a specific duration. Earlier, term plans in India would only offer death benefits for the security of your loved ones. Today, you can receive survival benefits on the maturity date. The survival benefit can be returned to you in the form of a premium value when the term policy reaches the maturity period.
What is whole life insurance?
Unlike term insurance, you can financially cover your families up to 99-100 years of age. Under whole life insurance, you can choose the tenure of the policy and the sum assured value based on your need. As a policyholder, you can choose to pay the premiums either for a specific period or throughout the on-going tenure of the whole life policy.
After understanding the meaning of term policy and whole life insurance, you might still not be sure to figure out which one is better than the other. Failure to identify which one of the two policies can be suitable for you can leave you in a dilemma. Therefore, let’s go through the following pointers mentioned below to know how to choose between term and whole life insurance for better clarity:
1) Determine the premium
The premium is a pre-decided amount in return for the provision of life coverage. It can be an essential component of every insurance plan, whether it is a term plan or whole life insurance. Typically, the premium can depend on factors such as your health condition, age, smoking or drinking habits, and so on. If you purchase the term policy at an older age or have a smoking addiction, the premium can be relatively high.
2) Compare different options
Comparison between a term policy and whole life insurance can help you understand your preference and suitability. Before making the final purchase between the two policies, you should compare them to understand the difference in their features, benefits, and premium. Shortlist a few of your preferred options and choose the policy based on your financial needs.
3) Select a reputable insurer
Before choosing either of the two policies, you should run a background check on your insurer. As a first-time buyer, go through the testimonials of every customer, check the claim settlement ratio, and so on. Typically, a high claim settlement is one of the indicators of the credibility of the insurance company. Therefore, don’t select a policy solely due to low premiums. Check the reputation of your insurance provider before signing up for an insurance policy. Use a term insurance premium calculator to compare your options
To sum up, an insurance policy can be an essential part of your life. Apart from the few things mentioned above, you should consider your financial goals, evaluate your budget, clear your past debts as well before choosing a policy. The final choice that you make can have a bigger impact on your life. Therefore, see to it that you choose a policy with adequate coverage and helps you to meet all your financial requirements in the long run.