Term vs whole life insurance: which is right for you?

Term plans pay out a large sum assured if the policyholder passes away during the term, at a very low premium. There is no maturity benefit, which is exactly why it is the cheapest way to secure your family's financial future.

Because premiums are low, you can afford a large cover - often 15 to 20 times your annual income - which is what a dependent family actually needs.

These combine insurance with a savings or investment component and return a maturity value. Premiums are much higher, and returns are modest compared with dedicated investments, but some people value the forced-savings discipline and the guaranteed payout.

For the same cover, a savings plan can cost many times more than term insurance. The gap is the savings component, which you could often grow faster in a low-cost index fund or PPF, depending on your risk appetite and goals.

A common rule is 15 to 20 times your annual income, adjusted upward for outstanding liabilities like a home loan and for future needs such as children's education. Subtract existing savings and cover you already hold.

For most families, a large term cover plus separate investments is the most cost-effective route - the 'buy term, invest the rest' approach. Savings-linked plans can still fit specific goals, like a guaranteed corpus for a milestone. Talk to an advisor to size your cover against your liabilities and dependents.