subject: Whole Life Insurance Versus Term Life Insurance [print this page] Life insurance has become an extremely important investment in todays times. However, with a variety of products in the life insurance category, it might be difficult to choose one, especially for someone who is a first time investor. The below mentioned categories are important life insurance investments and its description will help you understand them in a better manner.
Whole Life Insurance
The main feature of a whole life insurance is that it does not have a defined validity and hence the life cover is available to the policyholder throughout his/her life. The policy is valid till the death of the policyholder and he/she needs to pay regular premiums throughout his/her life. The corpus is paid to the dependents mentioned in the policy, on the time of the policyholders death. Premiums paid under whole life insurance policies are exempt from tax.
Term Life Insurance
This type of life insurance is a pure risk cover provided to the policyholder for a specific period of time. Here, the policyholder has to pay a fixed premium for the tenure selected, and in return, there is a fixed amount known as the sum assured that gets paid to the policyholders family, in the case of an untimely death of the person, within the tenure of the policy.
In case, if the policyholder survives the tenure for which the policy is taken, then he/she cannot claim any return from the life insurance company. In term life insurance too, premiums paid are exempt from tax. Generally, the premium that a person pays for this category of life insurance investment is the lowest.
Whole life insurance should be taken when a person wants a life cover along with savings. . It is ideal for someone who wishes to protect his/her dependents from a financial crisis that can arise due to the untimely demise of the policyholder. It is best suited for a married individual with kids. Term life insurance is best suited for a young unmarried person as he/she can get a high sum assured value at a very low premium. However, it can be bought at any stage of life as it is the best hedge against future uncertainty of life.
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