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Term vs. Whole Life Insurance: Calculate Premium and Cash Value

Investing in life insurance is a rather important decision – one you can’t make until you have all the information. If you’ve already started scanning the market for a policy that meets your financial goals as well as the needs of your beneficiaries, you might have come across two types of insurance quite frequently: term plans and whole life plans. While both have their own pros and cons, you will find that one of them suits your requirements more than the other.

Let’s take a look at the basic differences between the two so you can determine which is a better fit for you.

Term Life Insurance:

Term insurance plans provide coverage to the insured for a fixed period of time in exchange for a premium. Should the policyholder pass away while the policy is still functional, the beneficiary is entitled to receive a death benefit. However, if nothing happens and the policy matures, then no benefit is provided to any party. This is simply a protection plan, with no maturity or survival benefits.

 Whole Life Insurance:

Whole life insurance is a type of permanent life insurance, i.e. the insured is covered until death or 100 years of age. It provides flexibility in choosing the tenure and sum assured while offering maturity and/or survival benefits. The premium does not change throughout the term of the policy. It also comes with an accumulated cash value feature, in which you can borrow a certain amount from your policy.

The two chief points of disparity between a term policy and a whole life policy are the premium and the cash value. Here’s how they are different for each:


One of the biggest advantages of term insurance is that the premiums are much more affordable than any other than kind of policy, and therefore, it can be purchased in large sums. Whole life insurance, on the other hand, is known for demanding high initial premiums, making it an impractical choice for those who don’t have a large budget.

Finding out the premium amounts for a term or whole life insurance policy is as simple as using a term insurance calculator. It is a tool specifically designed to help you estimate the monthly cover that will give you the desired sum assured. All you have to do is fill out your information, and in less than 10 minutes, you will be able to calculate term insurance and whole life insurance premiums and determine the right plan for you.

Cash Value:

Since term plans are only designed to offer protection, they do not provide any living benefits or saving features. This is where a whole life insurance policy gains an advantage. It offers cash value accumulation, which can be used to pay your policy premium, receive loans at lower interest rates, or supplement your retirement income without affecting future premium amounts.

How this works is, a portion of the premium is designated to the policy’s death benefit. Another portion covers the administrative costs of the insurance company. The remaining premium payment is invested in your protection fund and other investment options. As you pay more premiums and earn more interest, the accumulated cash value of the fund continues to grow.

Another perk of using this cash value is that it is non-taxable. However, if there is any cash value that is left after the policyholder’s death, it goes back to the insurance company.

So, now that you know the main differences between term and whole life plans, it is time to calculate the premium costs and make the right decision.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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