What Is the Difference between Term and Whole Life Insurance Policies

What Is the Difference between Term and Whole Life Insurance Policies

The future always holds a plethora of uncertainties. Unfortunately, one of these surprises may even be the misfortune of your death. Death leaves an irreparable effect on your family’s life and leaves your loved ones bereft, emotionally as well as financially. Although you cannot save your family from the emotional trauma of it, you can secure their future financially by investing in one of the premium life insurance plans well beforehand.

A life insurance plan is an agreement with an insurance company in which the company pays your family a lump-sum amount of money known as a death benefit, in place of premium instalments paid by you.

Benefits of Life Insurance

Life insurance plans are beneficial in several ways, other than just providing financial support to your family. The following are the top benefits:

· Option of a Steady Investment

A good life insurance plan delivers substantial revenues on the aggregate premium paid by you all through the term of the plan. This is the reason why some of the best life insurance plans in 2018 provide sizeable earnings at the period of maturity, thus, serving your two-fold necessities of an investment aim and securing your loved ones against abrupt loss of earnings.

· Low Cost with High Benefits

One of the most common features of all the popular life insurance plans in 2018 is that they offer significant pay-outs for quite a small amount of premium. This means that you will be receiving, at the very least, 8-9 times the amount of the premium you had invested.

· Assured Earnings via Annuities

Life insurance is one of the best tools that offer you stable pay-outs as annuities when you plan your retirement. It acts as an established source of pension for you after you retire from your job.

· Tax Benefits

Under the Income Tax Act of 1961, you are eligible to gain tax benefits if you are a life insurance policyholder. Under section 10, 80C, as well as 80 CCC of the Income Tax Act, deductions concerning plan premium meet the requirements to avail tax benefits. This makes life insurance a significant tax planning instrument for you!

Are You Happy with Your Insurance Plan?

So, obviously, the insurance plan must include the aforementioned benefits and advantages to the maximum extent possible for you to be happy with it and that is not an easy task! To help you choose the right plan, we are going to explain Term and Whole Life Insurance Policies and the differences between them.

Term insurance is a category of life insurance plan in which you pay the premium for a fixed stretch of time, during which the death benefits will be paid to your beneficiaries in case of your untimely death during the policy period. In the case the plan matures, your respective beneficiaries are paid no portion of the benefits. Consequently, term insurance policies are often known as pure, unadulterated, and undiluted life insurance plans, wherein you collect a large sum of assured money by giving a minimal premium for a given tenure. This form of a life insurance gives you the flexibility of choosing both, your tenure and the sum assured.

The advantages of term insurance plans are very narrow as compared to other life insurance plans. This policy gives you no available maturity or survival benefit with term insurance plans. Therefore, term insurance policies are not an ideal choice for you if you wish to use it as savings or investment tools, instead of purely providing the death benefits to your beneficiaries.

Whole life insurance plans are wide-ranging life insurance policies, in which you can choose your tenure, the sum assured, and many other parameters while securing survival and/or maturity reimbursements to your beneficiaries as per the policy documents. This form of a life insurance policy allows you to collect the premium for a precise tenure or, all throughout the life of the insured.

This also gives you the benefits of – ‘borrowing’ money from your chosen insurance company at low charges of interest, receiving a lump sum as survival profit, receiving separated pay-outs of the premium, getting maturity benefits, and many more. Thus, this policy provides you with the cover, all the way through your complete lifetime.

Parting Words

Knowing the exact differences, advantages, and non-advantages of term life insurance, as well as whole life insurance, allows you to make an educated choice. To assist you in your search, Coverfox.com allows you to examine, assess, and compare the various life insurance policies on offer to choose and buy the right plan for your family and yourself.