10 major differences between term insurance and whole life insurance

Whole life insurance is quite similar to term insurance. But there are some important differences.

Every person wants the best for his family. Thus, every person toils hard every day to make sufficient money for his family’s comfort. However, one may work hard all his life and still not be confident about the future: after all, what can the family do when its breadwinner is absent, and has gone without leaving too much money to fall back on?

This is why most people take life insurance. It is a reliable safety net for the future, ensuring that one’s family is taken care of in one’s absence. Your loved ones should not need to sacrifice their future dreams for lack of resources – and life insurance can go a long way in helping make these dreams come true.

However, most people gravitate more towards whole life insurance rather than choose term insurance in India. Term insurance is also a life policy. Though both term and whole life insurance provide life cover, there are significant differences between the two as outlined in the chart below:

Parameter	Term insurance	Whole life insurance
Tenure of the policy	A fixed term of time (say 10, 15, 20 years)	Till the life time of the policy holder
Benefits type	Death benefit only	Maturity benefits
Returns offered	No returns offered	Low returns offered
Affordability	Very affordable, with low premiums	Expensive, with high premiums
Good investment?	Not an investment policy	Yes, especially when timed with major life events
Market-linked?	No	Yes, especially with ULIPs
Bonus potential	NIL	Good, especially with claim-free policies
Tax benefits?	Premiums are not taxed	Premiums may be taxed
Surrender value	NIL. Policy is terminated when premiums are not paid	There may be a surrender value based on when the policy is surrendered
Revision option	NIL	Yes

Perform these checks before you buy a house

Deciding to buy your own home is only half the job well done – the other half involves performing some essential checks before applying for a home loan.

After much deliberation (and paying rent money for years) you have reached a decision: you will now buy your own house. But after taking stock of your finances, you realise that you have only about a quarter of the money that you might actually need. The remainder must come from a home loan.

Accordingly, you start looking at houses and finally find one that you really like. But before you rush off to apply for a home loan, do check:

1. The locality. The house you buy must be located in an area that has all or most of these amenities: a hospital, school, entertainment centre, garden or park, gymnasium, swimming pool, fire brigade, grocery stores, bus stand, etc. Take a walk around the neighbourhood to see where everything is located and how far the house is from your place of work. Also speak to the immediate neighbours on the floor and ask them about their experiences in that locality. Find out if the building has any rules that you are not comfortable with, such as a ‘no pets’ policy.
2. Who is the developer? If you are scoping out under-construction properties, you must run a thorough background check of the developer’s credentials. With the real estate market facing a slowdown at the moment, many projects are stuck for lack of permission and funds, so you should ensure you are not stalled in your home purchase. Take a look at the developer’s other projects to determine quality of work and speed of completion. The best idea is to look for homes in projects that have a pre-sale tie-up with housing loan lenders. The loan process proceeds quite fast in such cases.
3. Is the price right? Do not accept the quoted price at face value: get in touch with a reputed broker in the area to find out the current market price for the house you want to buy. If the price is correctly quoted, you can run a calculation check using a home loan EMI calculator to see if you can afford to pay the EMI on the loan amount you require. If you are being charged above the asking price, find out why and negotiate heavily.
4. After you find your dream house, it is time to assess your finances again. Use a home loan EMI calculator to arrive at an EMI figure that you can repay every month without over straining your budget. You can use the home loan EMI calculator also to check the difference in monthly outgo basis fixed and floating rate of interest.

What do you want your legacy to be?

Not safeguarding the family’s future might leave them vulnerable to several future problems.

It is said that one’s life flashes by in front of one’s eyes as one is about to depart the world. One sees quick images of memorable incidents in one’s life in the last moments of consciousness. At this time, one is either contented about a life well spent or distressed about several tasks left incomplete.

Which one will be true in your case?

Life many others, you must wonder from time to time about your existence. Questions like ‘What is my value in the world?’ and ‘What legacy will I leave behind for my family?’ must occur to you. Chances are that you do not have all the answers yet. But you are certain of one fact: you want your family to think of you with love and admiration even after you are gone.

To this end, you must protect your loved ones from every kind of financial trouble in the future. Your absence must not stop them from fulfilling their destiny. Hence, it is important to take term insurance to safeguard their future interests. Not doing so may result in:

The household expenses suffering. Inflation continues to creep upwards and expenses rise daily. The prices of vegetables, fruit, toiletries, medicines and other essentials just keep on increasing. Then there are bills to pay as well. No amount of income is able to fully pay for all household expenses. Not taking term plan insurance will compromise your family’s lifestyle as they will be forced to forgo many expenses due to lack of money.

Your children’s education being jeopardised. School and college fees are quite high in India today, and higher education is even costlier. Your children might wish to pursue higher education abroad, or travel for a while after taking a gap year, or even start a small company. Or they might wish for a grand wedding. But inadequate money can scupper all these plans. Take term plan insurance to protect your children’s dreams.

Unpaid debts creating problems for the family. If you are gone without repaying all your loans, creditors will come calling on your loved ones. If there is no money to repay these debts, your family may have to sell a few things to deal with creditors. But taking term plan insurance means that the policy money can safely pay back the borrowed money.

Dependent family members not getting help. Your aged parents or younger siblings might be financially dependent on you. Your parents, especially, are vulnerable to financial constraints once they retire and their income stops. Instead of leaving them exposed to the vagaries of fate, it is wiser to take term insurance that can help them in their old age.

Why life insurance should be called ‘Love insurance’

The ultimate measure of the love you have for your family lies not in spending a lot of money on them, but in securing them from harm forever.

What have you done to prove your love for your family?

• Taken them on a foreign vacation every year
• Purchased a big house recently
• Bought expensive gadgets, jewellery, clothes
• All of the above

Most people would like to select Option 4, but have succeeded in at least one of the others. What if we told you that the most important option is not even included in the list?

We’re referring to a wonderful instrument known as the ‘life insurance policy’. It is a way of safeguarding your and your family’s financial future against every kind of setback, including your absence from their lives. At maturity, it provides a large fund of money that can take care of a variety of expenses, right from paying for a second home, funding your children’s education and wedding and even settling your parents in a nest egg of their own.

So why should you buy a life insurance plan?

1. Because you care for your family. Your family comprises you, your spouse, children and dependent parents. All of them are equally important to you, and their collective future is in your hands. Just imagine a future when you are absent from their lives. Will they be able to sustain their lives as they do now? Can the household expenses go on as before? If not, you need life insurance to take care of them when you are absent.
2. Because you may have borrowings. A lot of people need to borrow loans at some point in their lives. The loan may be personal (to buy a home, to pay for children’s education, etc.) or professional in nature (to buy office space, to open a new office in another city, etc.) At the moment, the loans are repaid through monthly EMIs. But what happens in the future when your income stops and the loans are still unpaid? How will your loved ones deal with creditors who come asking for their money? A life insurance plan provides the corpus to repay these debts.
3. Because you are committed to your family’s dreams. Your family has every right to dream big. Your children may plan to settle in a foreign location, your spouse may want to travel all over the country and your parents may want to have a separate retirement abode of their own. Making these dreams come true is your responsibility. You can do so only with adequate planning for the future. Your life insurance plan can pay for all these dreams and make your family the happiest one in the world!

Car insurance renewal has never been easier!

Both buying and renewing car insurance is easy if you take the online route.

In more ways than one, your car is your best friend. It gets you from spot to spot, becomes your silent companion on long drives and comforts you when you are blue. You can sit in your car on a rainy day and have a solitary cup of tea in the hills. Or you can take your family out on a road trip and have a lot of fun. Your car is your trusty steed and an important member of your family.

Since taking car insurance is mandatory in India, you probably already have an insurance policy on your car. Taking a good car insurance plan is the hallmark of a responsible car owner. It is also easy to buy a good insurance plan for your car – you can browse online for the best plans, take recommendations from other users and friends and select the best features basis your requirement. Some people prefer to buy car insurance through a broker, but this entails filling out paperwork and entrusting payments to the broker.

Just as important as taking a good car insurance plan is the timely payment of premiums. It does not do to be lax about premium payments – the policy might lapse entirely and you cannot get any of the benefits on it. The same applies to missing the car insurance renewal date. On the face of it, there is really no excuse to miss the renewal date: every insurance provider sends a reminder about the same well in time for the payment date. There is usually a grace period for paying the premium and renewing the policy. However, if the car insurance renewal is not done even in the grace period, the policy may lapse and the policy holder will have to buy a fresh insurance plan.

Also, driving the car without renewing the insurance plan is hazardous: you are completely unprotected if the car meets with an accident or causes damage to another vehicle or is damaged due to a freak incident or natural catastrophe. Not having a viable insurance plan at such a juncture will result in the policy holder shelling out huge costs of car repair and third party liability from his own pocket.

Thus, there is no excuse to skip getting your car insurance renewal done on time. It is true what experienced and responsible car owners say about driving without insurance: it is like crossing a busy road blindfolded! The chances of your meeting with an accident and becoming embroiled with costly repair and compensation payments become exponentially higher when you take the wheel without adequate protection.

Plus, it is extremely simple to renew your existing plan online. Simply log on to the insurance provider’s website, and check the relevant field marked ‘Insurance renewal’. This button directs you to a form asking for your policy details. After this, you can pay the payment online and your policy is considered renewed after the payment is debited.

With no need for paperwork and a quick turnaround time, why put off car insurance renewal for a second longer? 

You MUST read this if you love your car

If you love your car, you will do everything you can to protect it from harm. Here’s why taking car insurance is the first step in this direction.

A car in a battered condition reveals its owner’s cavalier attitude. We often see dusty cars parked on the roads, with their tyres in urgent need of air and the side mirrors hanging off their moorings. Contrast this with a shiny, freshly-washed car that gleams in the sunlight – you glance at it and think, ‘This owner really loves his car!’

If you belong to the second category of car owners, who shine and buff up their cars and do everything to prevent them from being damaged, you must read on.

Your car is your pride, and you take great pains to keep it in top notch condition. You realise early on that keeping your car in good condition results in the vehicle giving you good service – a well-tuned car has great reflexes, is likely to stall less and is less prone to frequent repairs.

But nothing prolongs your car’s longevity like car insurance. Taking a good car insurance policy helps protect the car in many ways. For one thing, it protects the car against damages arising out of accidents. Damage to the car results in costly repairs, right from replacing vehicle parts to the final painting and denting jobs. Just one car repair job can set the owner back by thousands of rupees. But instead of spending the money from one’s own pocket, one can simply have the motor insurance plan pay for it.

Car insurance providers have tie-ups with reputed service centres so that annual servicing, maintenance and repairs may be done at no cost to the policy holder, and using standard parameters. Also, this ensures less hassle by way of less paperwork and faster processing of claims. Most tie-in centres also conduct free annual maintenance for the car for a specified period of time.

But car insurance is extremely useful in another key area: Third Party Liability (TPL). Say your car is in an accident that is inadvertently caused by you, it can result in damages and injuries to another vehicle. In this case, you must bear the costs of damages to the other car as well as hospitalisation for the car’s driver and its occupants, if required. Hence, if you have taken comprehensive coverage when taking vehicle insurance, the TPL component of the policy safeguards you against the liability and pays for the damages caused.

Taking car insurance is mandatory in India. Instead of viewing it as an added expense, it is important to view it through the prism of safety and financial security. So while most people who drive a car take the bare minimum insurance necessary, a car lover like you must take a plan that factors in every eventuality.