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Term Life Insurance vs Whole Life Insurance vs Endowment Plans: What is more suitable for you?

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As there are different types of insurance policies available in the market, many people usually get confused in finding the best suitable plans for themselves as per their requirements,

Life insurance offers protection against unforeseen and adverse circumstances like death by paying a nominal premium.

However, “as there are different types of insurance policies available in the market, many people usually get confused in finding the best suitable plans for themselves as per their requirements,” says Rakesh Goyal, Director, Probus Insurance Broker.

Different types of life insurance policies available in India include Term Insurance, Term Insurance with Return of Premium, Unit Linked Insurance Plans, Endowment plans, Money-Back plans, Whole Life Insurance, Child Insurance plans and Retirement plans.

Here are the three most popular types of life insurance policies;

Term Life Insurance 

Term insurance is the purest form of insurance protection plan wherein the nominee receives the benefits of the policy in the event of the policyholder’s demise. 

Having said that, keep in mind in the event of the policyholder surviving the policy term, no maturity benefits are payable to the policyholder. To overcome this shortcoming, many life insurers in the country have introduced plans with survival or money back benefits, which usually come at some additional costs.

Goyal says, “Term life insurance policies are ideal for people who want substantial coverage at low costs. Ideally, every person with dependents and a limited budget should buy term insurance to protect their loved ones financially.”

Endowment Insurance 

Life insurance can be a tool not just for protection against death. Goyal explains, “It can also be used as an instrument to help one achieve various financial goals like planning for retirement, children’s education and/or marriage or buying a property. An endowment insurance policy precisely does that.”

Apart from covering the life of the policyholder, an endowment life insurance policy also helps the policyholder to save regularly over a specific period and create a lump sum corpus payable on maturity.

According to experts, Endowment life insurance policies are ideal for those who find it difficult to save money regularly. It helps in creating a disciplined investment as well as offers protection against adverse events like the death of the family’s breadwinner.

Whole Life Insurance

A whole life insurance policy offers lifetime coverage to the policyholder or 100 years by paying a certain premium for a limited period. Most whole life insurance policies offer a survival benefit at the end of the premium payment term either in lumpsum or yearly as long as the policyholder is alive. Additionally, a maturity benefit is payable on survival after 100 years.

Goyal says, “Whole life insurance can also be a valuable tool in estate planning as it can help one to create a virtual estate using life insurance.” 

For instance, a 30-year-old person who purchases a Rs 15 lakh sum insured policy by paying a monthly premium of approximately Rs 10,000 can create an estate of Rs 15 lakhs from day one. With every passing year of the policy, a cash value is also created due to the bonus added to the policy. 

Bottom Line

Every type of life insurance policy has its own set of pros and cons. “One should wisely choose the type of life insurance policy according to their requirements and budget. If required, do not hesitate to seek help from an expert or insurance advisor,” adds.   

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