Phone NumberTo Buy: 1800-258-5899 (9 am to 6 pm)

|

Emailcustomerservice@canarahsbclife.in

|

Locate BranchLocate Branch

Whole Life Insurance vs. Universal Life Insurance: Know the Difference

dateKnowledge Centre Team dateApril 22, 2021 views211 Views
Whole Life Insurance vs. Universal Life Insurance: Know the Difference

Buying a life insurance plan is not as complicated or confusing as it once used to be. But often, the kind of lingo used by banks to differentiate between different types of products they offer can befuddle someone who is new to the world of finance and investment. The closest some people come to have a financial portfolio is to get life insurance for themselves or their family, but sometimes even something as simple as insurance comes with a myriad of clauses and categories that can make the average citizen dread going to the bank.

One such confusing and similar-sounding set of terms is that of ‘whole life insurance’ and ‘universal life insurance - they may sound almost synonymous to you, but their implications in the banking sector are quite differentiated.

What is Whole Life Insurance?

To put it simply, whole life insurance provides coverage for your entire life, i.e., for as long as you live. This implies that even if you pay the premium amounts only for a specific and predetermined period of time, the death benefit that is promised by the bank will be valid for the remainder of your existence.

A whole life insurance plan is often recommended for people with families that have a lot of dependents, especially if the potential policyholder is the leading breadwinner of the family whose loss will be felt sorely in terms of finance. Whole life insurances can provide the peace of mind that the dependents will be taken care of if the policyholder dies an early and unfortunate death.

The amount accumulates over the years and becomes available to the policyholder or their dependents on maturity, by which time it would be significant enough an amount to cover whatever expenses the family may need after the death has occurred. The savings amount is also kept on a tax-deferred basis and can be borrowed if there is a need for it.

In this manner, whole life insurance helps an individual complete their long term financial goals for the entirety of their lives. Because it functions both as insurance and savings, banks tend to ask for higher premiums compared to ordinary term insurance.

What is Universal Life Insurance?

Universal Life Insurance is different from an ordinary life insurance plan because it is far more flexible in terms of the death benefit amount, which you can increase or decrease depending on your health and your preferences.

Of course, to increase the assured sum that is your insurance cover, you have to undergo a thorough medical examination that assures the bank that you are in good health. Decreasing the coverage, which means paying fewer premiums, can be done without giving up the entire policy if you pay a small amount as surrender charges.

Learn more on increasing sum assured in a term insurance plan and how it can beat the inflation.

The flexibility also extends to the frequency of the payment. Under universal life insurance, you can pay the premiums at any time; even all at one go, if you prefer a lump sum. From this amount, a policyholder can withdraw smaller sums partially, mimicking the way investment components work in other insurance-savings plans.

The only con of universal life insurance is that if the policy starts performing poorly, you cannot expect growth - you may end up spending a lot of money as premiums to keep the cash-value amount to the highest, and backing outcomes with the risk of high surrender charges. However, if flexibility is one of your priorities, you should definitely choose universal life insurance.

Differences between Whole Life Insurance and Universal Life Insurance

People are often torn between the two, but both whole life insurance and universal life insurance are permanent life insurance policies that combine components of life coverage and investment. The main difference between the two types is flexibility.

While universal life insurance is far more flexible on many fronts, the assurance and consistency that a whole life insurance policy offers is a robust income replacement in case something happens to the policyholder and the dependents need to be taken care of.

Which One should you Choose?

Your choice between universal life insurance and a whole life insurance plan depends entirely on what you are looking for. If you are searching for a policy that offers consistency and an assured payout that is predetermined, you should not think twice before opting for whole life insurance.

But if you are a risk-taker who prefers flexibility or are someone who cannot afford to pay for a whole life cover, universal life insurance is the choice for you since it can adapt to your financial situation.

People whose professions do not assure a stable flow of income usually prefer to go for universal life insurance, while people with a large number of dependents choose whole life insurance. Whole life insurances are highly recommended for people whose largest incentive to purchase insurance is their concern for their family’s future. Also, there are term insurance plans that offer whole life option along with return of premium. If you opt for such a plan, it’s a complete win-win for you.

Learn why a whole life plan with ROP is the smarter way of buying life insurance.

How iSelect Star Term Insurance Plan can Benefit you with a Whole Life Option?

Canara HSBC Oriental Bank of Commerce Life Insurance offers term insurance plan with whole life option in India. iSelect Star Term Plan comes with the following additional perks, which are helpful for anyone’s financial portfolio:

  • Assured returns of premium, with an affordably priced premium rate. This makes it easier for you to align your plan with your financial status and goals.
  • Increasing sum assured, as well as the option to change your coverage by purchasing additional inbuilt coverages for Accidental Death, Child Support, and in case of accidents.
  • Cover your spouse in the same plan so that you do not have to purchase a second plan.
  • Limited premium payment options.
  • Tax benefits depending on the prevailing tax laws.
  • There are multiple options to receive benefits either as a lump-sum or in settlements as monthly income or a combination of the two options.
ULIPs for planning your retirement

Purchasing a term insurance plan with a whole life option like iSelect Star can give your family the confidence to broaden their horizons without the fear of financial crisis. On the other hand, the flexibility of the universal life cover can give you options that whole life plans may not offer. At the end of the day, the choice between the two depends on what is best suited for your situation and family.

Related Articles

Browse by Categories

Get a Call Back

Do you want us to call back Please fill the form below

Annual Income (In Lacs)

Our Products

TERM Insurance PLAN

TERM Insurance PLAN

Whole life cover option available

Increase your life cover with changing life stages

Return of premium & in-built protection options

Multiple premium payment options

Avail tax benefits on premiums paid as per tax laws

ULIP PLAN

Unit Linked Insurance Plan

8 funds and 4 portfolio strategies to invest

Loyalty additions and wealth booster

Return of Mortality Charge is available on Maturity under all three cover Options

Flexibility of switching between the fund options to take benefits of market movements or change in risk preference

Pos Easy Bima Plan

Top Benefits

Hassle free

Get double life cover in case of accidental death

Choice of flexible premium payment and policy term

Avail tax benefit on premium paid

Frequently Asked Questions (FAQs) Related to Life Insurance Policies

The premium is one of the most important factors to consider before buying a life insurance policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance plan. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Life insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age: It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chance of contracting diseases is low. Young people also opt for the best life insurance policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender: The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits: The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term: Policy terms are also taken into consideration by insurers while deciding the premium amount. Life insurance policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the best life insurance policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation: The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physician’s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence, there are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the life insurance policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance plan.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: A life insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term, the beneficiary receives the death benefit. In case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment option is chosen, the policy works as a source of regular income.

It is a popular misconception that life insurance plans are only for accidental deaths. A term life insurance plan like iSelect Star Term Plan also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy a life insurance plan in your early 20s because it is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy the best life insurance plan at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why life insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

Call BackCall Back Pay PremiumPay Premium
Chat
Back to top