What Is Term Insurance?
Term insurance provides pure life cover for a fixed period—20, 30, or 40 years. If you die during the term, your nominee receives the sum assured as a lump sum. If you survive the term, the policy ends and there is no maturity benefit. Term insurance is designed solely for protection. It offers the highest coverage at the lowest premium—a ₹1 Cr term plan for 30 years may cost ₹10,000–15,000 per year for a 30-year-old. There is no savings or investment component. The idea: buy term, invest the rest in equity, debt, or other instruments separately for better long-term returns.
What Is Whole Life Insurance?
Whole life insurance covers you for your entire life, typically up to 99 or 100 years. It combines life cover with a savings or investment component. Part of your premium goes toward insurance and part builds cash value. Some policies pay dividends or bonuses. At maturity (or death), the policy pays the sum assured plus accumulated value. Premiums are 5–10 times higher than term for the same sum assured. Whole life is often sold as 'insurance + investment', but the returns are usually lower than pure equity or mutual funds.
Key Takeaways
- Term = pure protection: High cover, low premium; invest rest separately
- Whole life = cover + savings: Higher premium, lower returns than market
- For most: term wins: Better to buy term and invest difference in SIP/PPF
- Whole life for niche needs: Estate planning, guaranteed legacy, some tax situations
- Compare total cost: Whole life premium over 30–40 years can be ₹15–25L; term + SIP often builds more
Premium Comparison: Term vs Whole Life
📊 ₹50 Lakh sum assured, 30-year-old male (illustrative)
When Term Insurance Makes Sense
- Young family with dependents: Need high cover, limited budget; term delivers
- Income replacement focus: Goal is to protect family if you die; no need for maturity benefit
- Want to invest separately: Prefer SIP, PPF, EPF for growth; keep insurance and investment separate
- Cost-conscious: Same cover at 1/5th the premium of whole life
- Flexibility: Can increase cover, add riders, or switch policies as needs change
When Whole Life May Be Considered
- Estate planning: Want guaranteed payout to heirs regardless of when you die
- No investment discipline: Won't invest the premium saved; whole life forces savings
- Legacy / nomination certainty: Structured payout, some tax benefits in specific cases
- Very risk-averse: Prefer insurance company guarantee over market returns
- Older, already covered: Additional small whole life for specific legacy needs
The 'Buy Term, Invest Rest' Strategy
Financial experts often recommend: buy term insurance for adequate cover, and invest the premium you save (compared to whole life) in SIPs, PPF, or mutual funds. Over 30 years, the SIP corpus at 10–12% return can far exceed what a whole life policy would give. For example, saving ₹50,000/year extra and investing at 10% gives ₹1.1 Cr in 30 years. A whole life policy may give ₹50L cover + ₹30–40L maturity—less than the SIP corpus, and the cover reduces as you age in some policies. The strategy works if you actually invest the difference; if you spend it, whole life's forced savings might seem better—but building discipline is the real solution.
Common Myths
- 'Whole life gives returns': It does, but often 4–6% IRR; market can give more
- 'Term is waste if I survive': No—you got protection when you needed it; peace of mind has value
- 'Whole life is for retirement': Better to use NPS, EPF, PPF, SIP for retirement
- 'Term has no benefits after 60': By 60, children may be independent; cover need reduces
Use the Term Insurance Calculator
Use our Term Insurance Calculator to estimate the cover you need and premium for term plans. Compare with whole life quotes to see the cost difference.
Final Recommendation
For most salaried professionals: buy term insurance for 10–12× income cover. Invest the rest in SIP, EPF, PPF, NPS. Whole life can be considered only for specific estate or legacy needs, and even then, run the numbers. Term + disciplined investing usually wins.
Disclaimer
Premium and returns vary by insurer and product. This is general guidance; consult an advisor for your situation.