Difference between Term Plans, Whole Life Plans, and ULIPs
Term plans offer substantial life cover for comparatively lower premiums. They are more affordable when compared to whole life plans because they have no inherent cash value. For example, if you want to stop paying the premiums for your whole life plans and surrender your policy, you can do so. If a few basic conditions are met, you will receive a certain percentage of your total paid premiums, which is called Surrender Value. In term plans, there is no such option. If you stop paying premiums, you are no longer covered. That’s it – you are not entitled to receive any money back.
Whole life plans, also called Endowment Plans, are investment-cum-life-insurance instruments that have gradually increasing cash value. Once the policy matures, you receive pay-outs. If death occurs during the policy term, death benefits are payable to your nominee.
ULIPs, which is short for Unit-linked Insurance Plans, are market-linked investment instruments that behave and give returns just like mutual funds with some added benefits like death cover, lower fund-management charges, tax benefits, and more. Just like mutual funds, though, investing in ULIPs carries risk.
So, even though these three instruments give death cover benefits, they are different and you should think hard before you choose which one you want to go with.