Making the right decision regarding which insurance plan to choose can get quite confusing at times. If this is your first time coming across the terms such as whole and term life insurance, we’ve created this article to clear up at least some of the confusion. We’ve highlighted the main 3 differences between them. You’ll quickly be able to see what each of them is about and make your decision accordingly. To help you do that, let’s look at 3 key differences between whole and term life insurance.
1. Term insurance is more affordable, but only lasts a certain amount of time
Consequently, most people would never get any benefits from term insurance. But they will likely outlive the term which they’re insured for. However, it’s the cheaper alternative, which could make quite a substantial difference to some. In certain cases, whole life insurance can be up to 10 times more expensive than term insurance.
2. Term insurance is less complicated than life insurance, but there’s no value attached to it
In essence, term insurance is suitable for those who prefer to keep it simple. By using a term insurance premium calculator, you simply enter a couple of variables (with one of them being your age). The calculator will churn out a free quote and send it to you via email.
At this point, you have the option of choosing between guaranteed level term life insurance (level payment) and annual renewable. The latter insurance must be renewed periodically. These are best for short-term periods, since they start on the cheaper end and get more expensive as time goes on.
3. You can cancel a term insurance policy at any time without losing any value
In technical terms, whole life insurance is much more complicated compared to term insurance. However, it has certain perks that you don’t get with the latter. While you can cancel whole life insurance and get some money back, it’s important to note that you won’t get back as much as what you invested. Still, it’s money you can spend in a dire emergency.
This is referred to as surrender fee (or cancellation penalty). You also have the freedom to cancel term insurance at any time. Just know that once it’s no longer valid or simply expires, you’re not covered anymore.
Which one should you choose?
Term insurance is best suited for people who only need to get insured for a certain time period. That might include situations like while they’re paying off the mortgage or raising the kids. It’s also a great for deal-hunters, given the fact it’s cheaper in comparison. Also, pay attention to the fact that you can easily convert most term insurance plans to life insurance later on if you so choose. That should be a factor in your decision-making process.
Whole life insurance, on the other hand, is geared towards those who want to ensure that their kids are going to be covered no matter what happens to the parents. This is especially important if they have special needs. That may mean they have a much harder time taking care of themselves in general. And, in some cases, they may not be capable of it at all.
In the end, knowing which type of insurance to go for, boils down to your personal preferences and needs. With the right amount of research, you can enter the agreement with confidence. You can know that you’re the most qualified individual to make the final call.
About AEGON Life
A joint venture between AEGON – world’s leading financial services and Bennett, Coleman & Company – India’s leading media house. AEGON Life Insurance launched its pan-India operations in July 2008. Armed with a vision to be the most recommended new age life insurance Company, AEGON Life adopts the power of global expertise by leveraging digital platforms to bring transparent solutions, and to prioritize customer needs. Our financial planning and investment solutions include term life insurance plans, pension plans, unit-linked insurance plans (ULIPs), health insurance plans, child education plans, and more.