Question

Distinguish between term insurance and whole life insurance. How does the insurance industry deal with the unpopular nature of the term insurance.

Answer 1

Term Life Insurance: The simplest form of life insurance, a term plan offers a lump sum paid as Death Benefit (Sum Assured). The coverage is available for the limited term of premium payment years. With a low premium and substantial coverage amount, there are no Maturity Benefits.

Whole life insurance offers both, a death benefit as well as savings benefits. The policy lasts for your whole life and you get a lump sum when you decide to discontinue (Surrender) the policy. Whole life plans also offer the flexibility to choose your premium payment frequency and withdrawals.

Term Life Insurance	Whole Life Insurance
• Extremely cost-effective - provides high cover at a low premium	• Offers a longer tenure - even up to 100 years of age
• Perfect for those who need pure protection for a pre-defined term	• Helps in building a corpus for future needs
• Ideal if your dependents need protection against debts like a home loan	• Offers both a Maturity Benefit as well as a Death Benefit
• Offer various riders like critical illness, accidental death, etc.	• Offers flexibility to withdraw money for various financial need

With term insurance, the customers could get a large amount of life cover (i.e. sum assured) at a relatively low premium rate. The benefit amount is paid out to the nominee in case of death of the person insured during the term of the policy. The plan is perfect for those who need pure protection for a pre-defined term and ideal if your dependents need protection against debts like a home loan. So, aiming at customers with such needs and luring customers at young age for whom premiums will be low at they start early in age, helps the industry selling more term insurance plans now.