Term Insurance vs Whole Life Insurance: Which One Should I Opt for?


Term insurance and whole life insurance both offer life covers that can secure your loved ones against financial constraints in a contingency. But the products are structured to cater to different customer needs. If you want to decide between whole life vs term insurance, first, you need to understand the differences between the two.


What is Term Insurance?


This pure protection plan covers you against mortality risks for a fixed duration. In case you survive the policy term, your life cover terminates. The plan offers no maturity benefit. It only provides the sum assured to your nominee in case of an unfortunate event during the policy term.


Your entire premium goes towards providing your coverage, and there is no investment component. Hence, the term plans are extremely affordable. Regardless of your budget, you can get a sizable life cover. It can be enough to fund your loved ones' living costs, college tuition fees, mortgage repayments, and more in your absence.


What is Whole Life Insurance?


This life insurance policy provides financial cover for your entire lifetime. Whenever an unexpected event occurs after you buy the policy, your beneficiaries receive the death benefit.


Also, such plans combine life insurance with investment.


Some plans pay a guaranteed1 sum if you remain alive when the policy tenure ends. Others let you tap into the capital market's high return potential, yielding considerable profits. Insurers also offer bonuses3 and financial rewards for continuing your policy. Thus, you can gain substantial profits from whole life insurance, enough to fund your long-term financial goals.


However, part of your premium goes into building the cash value that earns returns. Thus, the schemes offer dual benefits – protection and profits. Hence, buying sufficient coverage for your family's financial needs can be expensive with whole life policies.



Difference between term and whole life insurance



Term plan

Whole life insurance


Minimal, even for high coverage

More expensive than term insurance


Specific term. Can extend up to 100 years of age



Income replacement in an exigency

Life cover cum investment for future life goals


Not applicable

Provided with some plans

Maturity/ Survival benefit

Not involved in traditional policies, but Return of Premium plans refund the premiums as maturity benefit

Always available, the amount depending on the policy, based on market returns or guaranteed1 additions/ declared bonuses3.

Death benefit

Sum assured is fixed at inception.

A guaranteed1 sum assured along with bonuses3 and extra payments, if any, or fund value, whichever higher

Surrender value

Available in case of limited pay and single-pay policies

Offered according to policy terms

Cash value and loans

Not available

Builds up with time, earns interests, provides loans against the policy in financial emergencies.



Is term insurance better than whole life insurance?            


Each life insurance product has distinctive features and benefits. The type of insurance that would work best for you depends on your financial circumstances and insurance needs. It would be best to compare the different policies before making a final choice.



Term vs whole life plans – pros and cons


Term plans are inexpensive. The relatively high cost of whole life plans might make keeping up with premium payments challenging.


But whole life insurance provides returns on your premiums, most often with profits. You can use the funds for your life's milestones.


In contrast, with a term plan, if you stop your payment, you don't lose money. Your life cover simply terminates. But after withdrawing from a whole life policy, you cannot recover the entire accumulated cash value. You have to pay a surrender charge that erodes your investment. However, the cost reduces as the maturity date approaches.



Whole life vs term insurance – which one should you buy?



Choose term insurance if:


  • Your family depends on your income, but the budget is a constraint
  • You need a replacement for your income only until your family achieves financial independence or your debts are repaid
  • You have already invested in several avenues, sufficient to creates wealth over time, but lack enough coverage


But what if you anticipate having financial dependents in your advanced years? You can buy a term plan coverage for up to 100 years of age, for a low price.


Choose whole life insurance if you want to:
  • Build a retirement a corpus
  • Buy property
  • Pay for children's higher education
  • Arrange for channels you can borrow or withdraw funds from when in urgent need of finances


TATA AIA Term Insurance Plans: Enjoy term cover up to 100 years of age


With Tata AIA, you can now opt for whole life coverage- you can extend your term plan cover until 100 years of age with Tata AIA Protection Plans.


Thus, with Tata AIA Life Insurance Protection Plans, you get extensive and affordable term life coverage till 100 years of age!


Following are the term insurance plans by Tata AIA:


  • Tata AIA Life Insurance Maha Raksha Supreme (UIN: 110N102V03)
    • Accelerated payout benefit providing 50% of the sum assured on the diagnosis of terminal illnesses
    • Life Stage Benefit to enhance coverage with increasing insurance needs



The question shouldn't be, "Is term life better than whole life insurance?" Instead, what you need to find out is whether you have enough life insurance. You cannot control life's uncertainties. But you can control the outcome your family faces. Buy a whole life insurance plan to create funds for your future life goals and cover the gap in insurance with a term plan. The combination will shield your family from financial shortfalls both during your lifetime and after any eventuality.





1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry


  • Insurance cover is available under the products.
  • The product is underwritten by Tata AIA Life Insurance Company Ltd.
  • The plan is not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.
  • This document is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. This document is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this document is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • For more details on risk factors, terms and conditions please read the Sales Brochure carefully before concluding a sale.


Tata AIA Life Insurance Company Limited (IRDAI Regn. No.110 • CIN: U66010MH2000PLC128403). Registered & Corporate Office: 14th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400013. Trade logo displayed above belongs to Tata Sons Ltd and AIA Group Ltd. and is used by Tata AIA Life Insurance Company Ltd under a license. For any information including cancellation, claims and complaints, please contact our Insurance Advisor / Intermediary or visit Tata AIA Life’s nearest branch office or call 1-860-266-9966 (local charges apply) or write to us at customercare@tataaia.com. Visit us at: www.tataaia.com.




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