Choosing the wrong kind of insurance policy can damage your financial plans. So before taking a decision you must research about different insurance policies available in the market. Term insurance policy is taken for a specific period of time and it provides accidental death benefits to the insurer. If you take a term plan at a young age, the premium amount, you have to pay will be less.
Whole life insurance policy is a permanent type of policy that provides death benefit with cash value. The policy is expensive than term assurance because some amount of premium is put into savings. So whole life assurance provides both insurance and investment to the insurer. If you are planning to purchase an assurance policy, then go through the comparison given below. The comparison will help you, in taking a final decision.
1. Suitable for whom - Term insurance protects you from unexpected circumstances. It is the cheapest plan available in the market but it doesn't provide maturity benefit to the insurer. So term plan is more suitable for bachelors. The whole life policy protects the entire life of a person up to 100 years. The insurance policy is suitable for a person having two kids and parents. The insurer can withdraw the amount whenever he wants. The policy will take care of your savings at reasonable low cost.
2. Factors to be considered - while taking term insurance you must consider certain factors like the premium amount, length of the term and how the policy will benefit you. Term insurance provides coverage for 10, 15 and 20 years. A whole life insurance provides coverage for the whole life of the buyer. While purchasing whole life insurance you must consider the premium amount, policy cash value and pay out.
3. Benefit - In term insurance, the insurer will get death benefit only if he dies during the policy term. The insurer will not get any benefit, once the policy expires. In whole life insurance, the insurer will get the full death benefit up to the age of 100. Other than the death benefit, the insurer will also get some invested amount. If the insurance company makes a profit, then extra bonus is also given to the buyer.
4. Premium amount - In term policy the premium amount to be paid is less. The premium is calculated based on the length of coverage. In case the buyer dies before maturity the sum assured is given to the nominee. In whole life policy, the insurer has to pay higher premium amount. The insurer has to pay the premium amount every year. The premium amount is calculated based on the buyer's age.
5. Cost effective - If you are looking for an insurance less than 10 years, then term insurance would be the best choice. The premium amount for term policy would be affordable. There are other smart investment options available to save your rest of the income. If you are looking for a policy that covers more than 20 years, then whole life insurance would be the best choice. Initially the premium amount would be high due to hidden costs and commission.