Life is highly unexpected, and no one can foresee what will happen next. We just observed how a virus (Covid-19) altered our vision of the world and made us consider how unpredictable our lives are. In such instances, we must consider our family, children, and loved ones.
Buying a life insurance plan can save your family, your closed one from losing money in expenses if something bad happens. This will give a sense of relief and you will live a stressless life. It will give you financial security and it will also help you in repaying the debt along with covering your medical expenses.
But, there is more than one type of life insurance and you must know which one is best for you. You must understand the difference between whole vs term insurance.
Here is what you need to know about the term and whole life insurance
What Is A Term Life Insurance?
A term life insurance plan as the name indicates is limited to a set number of premium payment years. It will give you a lump sum payment that is known as Sum Assured or Death Benefit. But this plan is a must-have as it is quite affordable and the coverage amount is quite big.
However, a term life insurance plan does not accumulate any monetary value and with your premiums being applied to your payment, there will be lower expenses for the policyholders as compared to whole life insurance.
Benefits of Term Life Insurance
It has a very modest starting investment. Term insurance is available in big sums for relatively low costs.
Term insurance, like whole life insurance, may be tailored to your specific needs. Many individuals are anxious about repaying their mortgage, funding their children’s school, or replacing a portion of their income if they die.
These are generally short-term requirements that may last a few years or much more. Matching these requirements with the appropriate amount of insurance can provide your loved ones the time and resources they need to make significant financial decisions.
It can be converted. If your temporary demands turn into permanent needs, most term plans can be changed (age restrictions usually apply) to whole life insurance.
What Is A Whole Life Insurance?
Whole life insurance is a very unique blend of protection and savings at a very low cost. Whole life insurance also known as permanent life insurance or cash value life insurance will give you coverage for the whole life as long as the premium payments are current.
In term life insurance, such plans cannot accumulate cash value but in whole life insurance, the accumulation of cash value is possible which you can get under different terms and conditions. This might be the reason why premiums are greater than for term life plans.
Whole life insurance has other subcategories as well which include actual conventional life insurance, universal life insurance, variable life insurance, etc. The bonus from the whole life insurance plan is greater than other plans and it also improves the policy’s protection as well as the investment component.
Benefits Of Whole Life Insurance
Whole life insurance has a much longer lifespan – more than 100 years. As mentioned earlier, it also helps in the accumulation of funds for future needs, And along with that, it also gives you maturity benefits as well as death benefits.
Moreover, the whole life insurance will allow you to access your funds for various needs and the plan is perfect for youngsters who just got their degrees and started their first jobs. As they cannot pay large sums in premiums.
Things You Need To Consider Before Buying A Whole or Term Life Insurance Plan.
Different people have different needs, lifestyles, and priorities. You cannot claim one plan for everyone. One might get more benefits with a term plan instead of a whole life insurance plan. This is why you need to consider some things before getting a plan. Here are a few things you need to consider.
- Consider your lifestyle
- Your age
- Your daily routine
- Your health
- Number of times you have to visit the doctor
- Your financial situation
- Your future financial plans
- Age of your children
- Do you think a lot about the medical bills and health care costs in your later life?
- How much debt is on you including your mortgage?
- Do you have any retirement plans? How much is it?
- Have you thought about your children’s college education? Do you have enough to support their education?
As, while the cost difference between a term policy and a whole life policy may appear to be significant at first when you consider all of the benefits that a whole life policy can provide throughout your life – and the certainty of an eventual payout – you may feel it is a better overall value.
Getting a life insurance plan is indeed a big life decision and you must think and choose wisely about the type of plan you want. Understand the above-mentioned definitions and consider the benefits in each case. Get the best plan for yourself.