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Term Insurance vs Whole Life insurance. Which is better? How to select your insurance policy?

Updated on March 16, 2016

Term Insurance vs Whole Life insurance. Which is better? How to select your insurance policy?

Many people are often confused as to what type of policy they should choose for while going for an insurance cover. Life is unpredictable and hence one needs to insure his/her life so that their beloved ones could get a lump sum, called as Death Benefit in case of his/her untimely death. Apart from providing security, insurance is a form of asset. One can also get tax deduction by investing in Life insurance

Insurance cover must be chosen based on one’s income, monthly expenses, coverage requirement and future needs eg, planning for your child’s education. If you are nearing retirement, you need insurance for a relatively shorter span. You could afford to pay a higher premium and get a higher coverage amount. On the other hand, if you are a 30 year old individual, you need an insurance cover for a much longer period for a relatively low premium.

Whole Life insurance provides a combination of investment and protection. Whole life insurance offers coverage for entire life or until you cross the age of 100, whichever is earlier. In whole life insurance, a part of the premium is invested. If the insurance company makes a profit on the invested amount, it is declared a bonus. Apart from the bonus amount, you also accrue a Cash value over time. If you are alive at the time of maturity, the cash value will be paid to you. If you die before the policy maturity, it will be given to the nominee. The cash value is normally equal to the sum assured.

In case of Term insurance, you only get the protection component. There is no maturity benefit. It safeguards you against any unforeseen circumstances. Term insurance is suitable for young people, especially unmarried individuals as he/she can get a cover of say Rs 10 lakh at an annual premium as low as Rs 2,500. For a married person in his/her 40s with kids, Whole life insurance would be more suitable. The policy will cover him for entire life with an affordable premium

Below are some of the popular Term life plans in India:

Birla Life Click 2 Protect Plus

Bajaj Allianz-iSecure

LIC Amulya Jeevan

Bharti Axa Term Plan

Aegon Religare Term plan

Choosing Whole Life Insurance is like leaving behind an Estate: Experts say that choosing Whole life insurance is like leaving behind an estate for one’s dependents. However, one must ensure that only a small amount gets deducted towards risk cover. Choose a plan that allows you to withdraw money free of charges. There must also be a surrender facility

Whole Life plan will serve as retirement income: You could choose a plan that gives periodic payouts after a certain period of time. This will serve as your retirement income after your regular income ceases

Below are some of the Popular Whole life plans in India:

LIC Whole Life policy

Max Life Whole Life Super

HDFC Life Sampoorn Samridhi Plus


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