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Term Vs. Whole Life Insurance: Which is Right for Me?

Updated On Apr 26, 2021

Term insurance refers to the payout over a fixed period of time of the premium. In the event of the untimely death of the policyholder during that period, the insurance company is liable to pay the beneficiary/nominee the sum of the death benefit.  No maturity value is given if the policyholder lives through the lifetime of the contract.

Whole life insurance policies have dual benefits protection and investment for the whole life of the policyholder/insured. In general, whole life insurance policies come with a maximum age of 100 years. Such a scheme often provides the value of the accumulation of cash which builds up over the policy period.

Term Insurance and Whole Life Insurance:  Which is Better?

The major differentiating features of term insurance and whole life insurance are given below:

Death Benefit

Term Insurance

Whole Life Insurance

If the policyholder/insured dies during the term span, a term insurance plan only offers death benefits. The sum is given in term insurance as the death benefit is much higher than the maturity benefit given by whole life insurance policies. 

A whole life insurance policy gives the insured/policyholder both death and maturity benefits. Most policy buyers prefer investing in whole life insurance policies to benefit from the dual benefit of investment returns and protection,


There is also a lower premium for term insurance plans than for entire life plans. The term insurance premium amount is allocated to the provision of insurance coverage. 

For whole life plans, for insurance coverage, half of the premium is used while the remainder is invested. If the policyholder withdraws, surrenders, or lives up to the maturity date, the balance accrued shall be returned at the value of the sum assured. Policyholders can also benefit from the bonus if the amount invested generates profits.


It is much easier to surrender term insurance than to surrender a whole life insurance policy. When the insured/policyholder stops paying the premium, the policy benefits end in the term insurance, and the insurance policy lapses. 

In whole life insurance plans, the maturity benefit is given if the policyholder/insured completes the whole policy tenure. If the insured surrenders or closes the policy in the mid-term, the insured/policyholder is not entitled to receive the entire saving component of the policy, since only the premium balance is paid back to the policyholder/insured after such deductions.

Cash Value

Term plans do not provide any cash value. 

Whole Life insurance premiums are invested in financial instruments, hence, a cash value is built over a time period. Policyholders can withdraw a portion of the cash value during the policy tenure.

You may also like to read:

Term Insurance plans: Everything You Need To Know

Whole Life Insurance: Everything You Need To Know

Bottom Line 

Investors must realise that life insurance is a vital component of successful financial management. Owning both whole life insurance and term insurance at the same time is advantageous. While whole life insurance offers the advantage of return on investment and insurance coverage, by paying a small premium, you can ensure the financial future of your loved ones with a term plan. To choose the right insurance plan according to your suitability, the above points will help to make an informed decision.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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