Life insurance policies are important for ensuring financial security. Furthermore, there are different types of life insurance plans, like term life insurance and whole life insurance. The benefits depend on the plan you choose.
If you want to know the difference between term and whole life insurance, then read this article.
Life insurance is crucial for financial protection. It can help in reducing the financial burden on a family in case the earning member passes away.
For instance, when a person purchases a life insurance, the insurer provides his/her nominees with life cover. If the policyholder passes away during the policy term, then the insurance company can provide the nominees with the cover amount, which can help in providing financial assistance for future expenses. This life insurance can also provide maturity benefit if the insured person survives the term. Therefore, buying a life insurance policy can ensure that the insured person leads a financially stable life.
There are various types of life insurance policies. These policies are differentiated based on the features they provide. Two of the most popular types of plans are-
- Term Insurance
- Whole Life Insurance
Let’s understand the differences between these insurance types-
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Term insurance is the most common type of insurance policy. It is catered towards people who need insurance for a specific duration.
How Does it Work?
The person who wants to be insured with this policy needs to pay regular premiums during the tenure of the plan. The policyholder’s nominee will be insured with life cover. In case the policyholder passes away during the tenure of the plan, the insurer can provide the life cover amount to the nominees of the plan.
Things to Keep in Mind About Term Insurance
- Term insurance can ensure the financial security of the policyholder’s family as it offers the death benefit to them in case of an unforeseen event.
- If the insured person survives the term, then he/she will not receive any maturity benefit.
- As there is no cash value, the premiums of a term insurance plan tend to be lower compared to other types of plans.
- This policy is recommended to people who want to buy insurance that offers a high cover amount at a low premium.
- Another way to ensure the premium stays cost-effective is to buy this policy at a young age. The younger the person is, the lower the premiums can be.
Whole Life Insurance
Unlike term insurance, which doesn’t offer any savings benefit, whole life insurance provides savings benefit as well as the death benefit. Whole life insurance is a life-long insurance protection plan and stays active until it is surrendered.
How Does it Work?
As whole life insurance is a life-long plan, the policyholder needs to pay premiums until it is discontinued. Once the plan is surrendered, the insured person receives a lump sum. This plan provides the policyholder with the flexibility to choose their payment frequency and withdrawals.
Things to Keep in Mind About Whole Life Insurance
- This plan can stay active for life long.
- Whole life insurance can be used to build a financial corpus.
- This policy offers a death benefit and maturity benefit.
- There is flexibility to choose how to withdraw money.
- As this policy has cash value, its premiums are high.
- It is recommended for people who need investment benefit and insurance for the long term.
Term vs Whole Life Insurance
While both are great options, you need to understand your requirements to select the right one. However, it is important to buy insurance, whether term or whole life insurance, to get financial protection.