The Difference Between Whole vs Term Life Insurance


People prepare their budget as per the estimate of income and expenses. They also plan many things for the future ahead. However, they often fail to plan for the financial implications of an unusual event that may risk their existence. This is where life insurance comes into the picture.

Primary Types of Life Insurance

There are two primary types of life insurance policies, namely term insurance and whole life insurance. Firstly, let’s understand the basic meaning of each type.

Term insurance refers to a life insurance policy that provides a financial shield to the insured person for the defined period or term of the policy. It provides financial assistance only in case the insured is no more during the term of the policy. Term insurance calculator further guides you with the amount of premium you need to pay for the estimated cover.

On the other hand, whole life insurance refers to a life insurance policy that provides financial protection to the entire tenure of the remaining life of the insured person. Computation of premium for whole life insurance includes a little higher level of calculus.

Let’s now dive deep into the details of each type so that you can make an informed decision.

Term Insurance Vs Whole Life Insurance

PointsTerm InsuranceWhole Life Insurance
Primary BenefitsCover against eventualities, accidents, and maturity benefits are available only during the specified tenure or term.Provides maturity benefits, i.e., the maturity amount is paid to beneficiaries after eventualities. It also provides financial protection for life.
Investment OptionIf you look at life insurance from an investment angle, then term insurance is not the option to go for.This is a good investment vehicle, and you can include it in your portfolio.
Payout to the Insured PersonIf the insured survives the tenure, they get the maturity amount. There is no permanent coverage, and the benefit is guaranteed only during the tenure.The insured person does not get a payout since it is paid to the beneficiaries in case an eventuality happens. Hence, there is an assurance that the insurer will have to pay something at the end. Thus, there is permanent coverage.
Initial PremiumSince the tenure of term insurance is specific and limited, the premium amount is lower. Term insurance calculator helps to calculate the premium amount quickly.Since the tenure is extended till the insured person survives, the premium is a little higher as compared to term insurance.
Subsequent PremiumIt may remain at the same or increase after the term is completed.Subsequent premiums are the same as the initial premium, and do not change.
Borrowing FacilityThe insured usually does not get the facility to borrow money against term insurance.The insured is allowed to borrow money during the term at a lower interest rate. This is possible through the cash value. This does not change the premium amount. However, in the case of non-repayment of the borrowed amount, it is adjusted from the benefit.
TenureIt is usually within the range of 10 to 30 years.It is available throughout the lifetime of the insured.
Cash ValueThere is no cash value benefit.The premium amount is invested in the protection fund and other investment vehicles. The insurance company may also provide a bonus in case there are profits from such investment.
CategorisationIt is categorised as a pure life insurance plan.It can be categorised as savings as well as a protection plan.

So, Which One is Better?

  • You cannot just blindly select any of these. Each one is unique, and thus, an informed decision needs to be made after evaluating a few factors such as:

–     Your age.

–     Your financial status.

–     Your historical and present health status.

–     Number of dependents.

–     Intensity of your family’s financial needs.

–     Other financial commitments such as EMIs for a home loan or vehicle loan.

–     Your retirement plans.

  • There is no fixed rule for the selection of life insurance. However, we can guide you for the same on a broader scale:


Whichever life insurance plan you choose will have some financial implications. Term insurance policies are simpler than whole life insurance policies. You may easily buy term insurance online by visiting the websites of the insurance providers. However, the benefits of whole life insurance outweigh those of term insurance. Thus, a list of research points would help you assess your need in a better way. Evaluate your financial status as per your present age, then drill down the benefits each plan offers.

By Richard