Term Vs Life insurance.

Term versus whole life insurance.

Introduction to Life Insurance:

Insurance as the word suggests, means to safeguard. Through insurance we try to safeguard our future. Those safeguard precautions can be taken in the case of house, vehicle, home contents, furniture, machinery, and life of the loved ones after the death of the person and many others. Among all of the insurance, life insurance is one, which is must to be bought. And there too, the more the amount you keep, more will be the financial security of the loved ones is achieved.

Life insurance is meant to safeguard the financial interest of the loved ones of the person in case of death of the person. No one can predict future, and this statement is widely proven and accepted by all the people of all races, religion, caste, color, countries etc. Thus it is felt by every human being that in case he/she dies than his loved ones should not suffer. That is there necessities should be met easily, and they should be financial sound enough to meet the expenses of such necessities.

Kinds of Insurance:

Insurance can be of many kinds and amount depending on the will of the person buying the Insurance. The amount may varies from 10,000$ to 1,00,00,00$, just depending on the capacity and will of the person buying the insurance. Therefore it’s just depending on the Income and willingness of the person to spend money on Insurance. Even if the person is rich, middle class or poor, in all cases life insurance is needed and also bought by the people. The need for life insurance policy arises only in the case of those people who firstly love their family members and secondly they accept the fact that no one knows future. Thus insurance policy is bought to safeguard the financial future of his/her own or loved ones in future, which is unpredictable.

The time period of insurance cover also depends on the decision made by the buyer. That is till how long he/she feels that the life insurance is required. The range of time period may vary from one year to twenty years or for the whole lifetime even. Thus its the person’s own discretion to take the decision on this issue of time period. It can be any of the following time limits.

1. Long term or life term.

An insurance which is for a longer period, that may be twenty, thirty, or even for the lifetime. Such insurance is called the long term or life term insurance. Their coverage can be for the life term.

2. Medium term.

A medium term insurance is one which for five to ten years at maximum. This kind of insurance premium are lesser than short term insurance, but their coverage is for some specific period only and not for the life term.

3. Short term.

An insurance, which is for a year or five years at maximum are, called the short term insurance. The premium amount is highest in this case. Also the insurance coverage is for the smaller period.

Term insurance:

A Term insurance is for some specific period. Short term and medium term insurance are the examples of term insurance. For instance, if a soldier buys insurance for two years, in which he has to go to IRAQ, where he/she feels that his/her life can be in danger during these years. This can be called term life insurance. The time period may vary from one year to ten years.

Whole life insurance:

Whole life insurance is one in which a person is insured for his/her whole life or maximum part of his/her life. For instance, a businessman makes his whole life insurance policy, than he will be able to reap the benefit through out his life. Long term is the best example for the whole life insurance. That is the time period is for twenty years or more than that. That can be even for the lifetime.

Difference and benefits of Term and Whole life insurance:

There is much difference between the term and whole life insurance policy. Along with that there are different benefits between the two. Following are the few differences and benefits of term life insurance and whole life insurance.

A) Term life insurance coverage is for few years, say one, two or ten years at max. While the whole life insurance coverage is for the whole lifetime or the maximum of his/her life.
B) A term life insurance premium is always higher than whole life insurance premium.
C) The benefit of term life insurance is for few prefixed years. While the person with whole life insurance enjoys the benefit through out his/her life, and later by the relatives after death.
D) A term life insurance gives lesser return. While the whole life insurance gives the maximum returns possible.
E) The returns from the term life insurance are taxable under short-term capital gains. While whole life insurance policy returns are not at all taxable.
F) The term life insurance policy coverage is only for the specified period. While the whole life insurance policy gives the coverage throughout the life and even after that.
G) Money gets blocked in the whole life insurance policy for a long time. While the money is immediately received back with profits after the specified years are over.
H) It’s a long and tiring process in case of whole life insurance. While the term insurance policy plans gets over within the specified period, which is comparatively shorter time period than the life term insurance policy.
I) Term life policy is more expensive with lesser return. While the Whole life term policy is less expensive with bigger returns.

Conclusion:

In short, term life insurance has its own benefits and returns that can be reaped in the short term. While the life term insurance policy has its importance of giving return and benefits through out the life. Thus its the person’s own discretion to take the decision of buying such insurance policy that best suits his pocket and lifetime changes.