Your family members are the support system of your life. You always want them to stay protected, healthy, and happy - even when you won’t be around. To deal with any unexpected situation, it is essential to have a financial plan in hand. So, a term life insurance policy is one of the best tools to rely on.
There are numerous types of term life insurance plans available in the market - like regular term life insurance and whole life term insurance.
Let's understand this with an example.
Radhika and Sangeeta both plan to buy term insurance plans. Radhika has a dependent spouse and a home loan on her head. On the other hand, Sangeeta is a single mother with two children and she wants to ensure a bright future for them. She also wants to leave behind a financial legacy for her loved ones. In this case, a regular term insurance plan will be appropriate for Radhika while a whole life term plan will be suitable for Sangeeta.
In this article, we will discuss how a whole life term insurance plan differs from a regular term life insurance plan. So, let’s begin.
What is Regular Term Insurance?
A regular term insurance plan acts as a financial cushion for your loved ones in case of your sudden demise. It is the most basic variant of term insurance in the market and is offered by every insurance company. The plan provides coverage for a predetermined number of years.
How Does Regular Term Insurance Work?
Regular term insurance is one of the most affordable and simple ways to secure the financial future of your family. You can choose a suitable cover amount adequate to fulfil their needs and requirements. You will have to duly pay all the premiums to avail of the plan’s benefits.
If you pass away during the policy term, your family will receive the cover amount as a death benefit. If you survive the policy term, you won’t receive any benefits from the policy.
Swati is a school teacher. She has a son who is financially dependent on her. She wants to send her son abroad for his higher studies and takes an educational loan of Rs. 25 Lakhs to fund his higher education. She also purchases a term insurance plan with a sum assured of 30 Lakhs for a policy duration of 40 years to remove the burden of debt from her son’s shoulders if something were to happen to her. She appoints her son as the nominee.
If Swati passes away in the middle of the policy tenure, the insurer will pay her son a sum of Rs. 30 Lakhs as a death benefit. If Swati lives longer than the policy's term, she won't get any benefits from the insurer and her term insurance policy will terminate.
What is Whole Life Term Insurance?
Whole life term insurance, as the name suggests, provides you coverage for your lifetime (until you are 99-100 years old). It aims toprovide guaranteed financial security to your loved ones and is also a great way to leave behind a tax-exempt financial legacy for your loved ones. The basic logic here is that, when it comes to whole life term insurance, at least the premiums you pay won’t be wasted.
How Does Whole Life Term Insurance Work?
If you want a plan that lasts your entire lifetime, you should choose a whole life term insurance policy. Its functioning is similar to a regular term insurance plan.
?What happens if you pass away while the policy is active?
In case you pass away during the policy term, your loved ones will receive the cover amount as the death benefit.
What if you survive?
?On the other hand, if you survive the policy term, you won’t get any payback.
Suresh is a 37-year-old bank employee who has two children named Raj and Neha. He wants them to live a comfortable life even in his absence. So, he purchases a whole life term insurance plan with a sum assured of Rs. 50 Lakhs. The policy will cover him up to the age of 99 years. He also appoints both his children as nominees.
If Suresh passes away during the policy term, his children will receive the sum assured as a death benefit. If Suresh survives the policy period, he won’t receive any benefits.
Whole Life Term Insurance Vs Regular Term Life Insurance
Let’s find out how a whole life term insurance plan differs from a regular term life insurance in various aspects -
Whole life term insurance
Regular term life insurance
It provides coverage for your whole life, i.e., up to 99-100 years.
It provides coverage only for a fixed period of time.
You can buy this plan if you have someone who will remain financially dependent on you even after your retirement.
For instance, if someone suffers from a disability or mental illness in your family, this plan will financially support them throughout their life - when you are not around them.
You can consider purchasing a term plan till the age at which you will have finished paying off all of your debts, settled all financial responsibilities, and accumulated enough money to cover the rest of your life. This is usually your retirement age.
Whole life term plans are expensive as they provide you coverage for an extended period of time.
For example, say a 30-year-old non-smoker male purchases Canara HSBC’s iSelect Smart 360 plan with a cover amount of Rs. 1 crore up to the age of 99 years under the regular pay option. Whole life term insurance will cost him Rs. 41,027 per year.
They are cheap compared to a whole life term insurance plan.
For example, say a 30-year-old non-smoker male purchases Canara HSBC’s iSelect Smart 360 plan with a cover amount of Rs. 1 crore for up to the age of 60 years under the regular pay option. Regular term insurance will cost him Rs. 12,101 per year.
Note: The premiums are taken on 27/02/2023.
We have reached the end! Choosing any insurance policy depends on your and your family’s needs. If you want a plan that provides you coverage for a specific period, you can buy a regular term life insurance plan. And if you want to leave behind a sureshot financial or parting gift legacy for your loved ones, a whole life term insurance plan is the best choice for you. So, analyse your requirements thoroughly to make an informed decision.