Term Life Insurance or Whole Life Insurance: Which Should You Opt for and Why?

What is life insurance? What is term life insurance? What is whole life insurance? Which one should I opt for? Which is the better one? These are common questions an amateur investor on the insurance front faces. The key thing to remember is that the purchase of term or whole life insurance not only depends on your individual financial goals but also on the financial wants of your family. In both forms, the policy holder’s beneficiaries, i.e. loved ones, get a lump sum payment on the policy holder’s death. This payment is called the death benefit. Let us understand each form below:

Term Insurance:

In term insurance, the policy holder’s beneficiaries get a substantial payout in the event of the sudden demise of the policyholder, within a stipulated time period. In the event that the policyholder does not die within the given term, then the person does not receive any kind of payment from the insurance company. Hence the premiums for a term insurance are very low while the payouts are quite substantial.

Is Term Insurance for you?

Term life insurance is ideally designed to ensure that people who cannot buy a complete life cover can also avail protection for their loved ones. The low premium ensures that you can afford insurance and hence protect your family in unforeseen circumstances.

If you are in your thirties, have young children and are the sole bread winner, a term plan would be ideal for you to help your family in your absence. You can choose the term to cover the time period till your children start earning and become self-sufficient.

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By Michael Garcia