Introduction
Term insurance refers to the type of life insurance policy that provides coverage for a specific period (10,15,20 or30 years). It provides financial protection during this period and beneficiaries receive death benefit if insured person (policyholder) passes away during this term. On the other hand, whole life insurance is a type of life insurance policy that provides coverage for entire life cycle. The main difference between these two life insurance policies is the length of coverage provided to the policyholders.
Difference Between Term Life And Whole Life Insurance
Some of the key differences between term insurance and whole life insurance can be highlighted as follows:
1. Meaning
Term Life Insurance: It is a type of life insurance policy that provides coverage (financial protection) for a specific period of time which is predetermined while purchasing the policy.
Whole Life Insurance: It is a kind of life insurance that will never expire and provides coverage for entire life of the policy holder.
2. Coverage Duration
Term Life Insurance: It provides insurance coverage for a specific period of time such as 10 years, 20 years, 25 years etc.
Whole Life Insurance: It provides lifetime insurance coverage, it means this type of life insurance policy never expire.
3. Cost Of Premium
Term Life Insurance: Generally, premiums in this kind of insurance are lower than whole life insurance insurance because of limited term.
Whole Life Insurance: Premiums are higher than term insurance because it provides lifetime coverage.
4. Cash Value
Term Life Insurance: It provides death benefit if policyholder passes away but does not have cash value.
Whole Life Insurance: Yes, it builds cash value.
5. Suitable For
Term Life Insurance: It is suitable to meet temporary financial obligations
Whole Life Insurance: It is suitable for long term financial planning
6. Scope
Term Life Insurance: It has limited scope than whole life insurance because it expires after when the term ends.
Whole Life Insurance: It has wider scope because it never expires and provides permanent coverage to the policyholders.
Also Read
Advantages and disadvantages of life insurance
Features of term life insurance
7. Simplicity
Term Life Insurance: It is simple and easy to understand
Whole Life Insurance: It is more complex than term insurance
Term Insurance Vs Whole Life Insurance (Comparison Table)
|
Basis Of Difference |
Term Insurance |
Whole Life Insurance |
|
Duration |
Specific/Fixed |
Entire Life |
|
Cost Of Premium |
Low |
High |
|
Cash Value |
No |
Yes |
|
Scope |
Limited |
Wider |
|
Simplicity |
Simple |
Complex |
|
Ideal For |
meeting short term needs |
Long-term financial planning |
Distinction Between Term Insurance And Whole Life Insurance In Short:
* Term insurance provides financial protection for a specific period of time but whole life insurance provides lifetime protection.
* Term life insurance is simple to understand and easy to buy. Conversely, whole life insurance is more complicated to understand and requires lengthy and complex process to buy the policy.
* Term insurance is ideal to fulfill short-term financial needs. Whole life insurance is suitable for financial planning.
* Term insurance has no cash value but whole life insurance builds cash value.
