Whole Life Insurance – Know All About It

There are innumerable risks to human life. Millions lose their lives every year in unpredictable incidents ranging from accidents to natural calamities. The emotional toll of losing a family member gets adequate focus, but the financial impact goes unnoticed. Life insurance policies have become the primary tool for mitigating the financial impact of untimely death. A typical life insurance policy has a fixed tenure. However, whole life insurance plans have changed the dynamics for potential customers.

What is a whole life insurance policy?

Contrary to regular life insurance policies, a whole life insurance policy offers insurance coverage for the entire life i.e. in most cases until the age of 99 years. The nominees are paid the sum assured whenever the insured dies before the age of 99 years. Let us understand with an example, the nominee would not be paid anything if insured dies at the age of 65 and the tenure of the policy was only till 60 years. In the case of whole life insurance policy, the nominees will be paid the sum assured if the insured dies any time before the age of 99 years.

How does a whole life insurance policy work?

Whole life insurance plans are a combination of insurance and investment as they offer maturity and survival benefits, besides death benefits. The insured is protected until death and receives a maturity benefit on survival. There are various types of whole life insurance plans. One can opt for a traditional whole life insurance plan or a unit-linked whole life insurance plan. Traditional plans can be further categorised into participating and non-participating insurance plans. The amount of maturity benefit will depend on the type of whole life insurance plan.

Features of a whole life insurance policy

Guaranteed premiums

The premiums of whole life insurance plans remain constant throughout the policy term. The premium is finalised after taking into account various factors like age, occupation and smoking habits of the insured. However, once it is decided, the premiums do not change.

Survival benefits

All life insurance policies provide survival benefits as per the terms contained in the policy payout the survival benefits, if all the premiums are paid on time. This comes with whole life savings plan.

Life protection

Whole life insurance plans provide financial protection for the entire life. The coverage lasts until 99 years, which is the highest age until which life insurance can be extended.

Benefits of whole life insurance

The whole life insurance plan offers a number of benefits.

Peace of mind

The primary benefits of life insurance is the peace of mind offered by it. The loss of the sole bread-earning member can be emotionally and financially debilitating for the family. A whole life insurance plan does not just ensure insurance coverage for the entire life but also gives you the assurance that your family will be financially stable in your absence.

Affordability

The whole life insurance plan offers extended life cover at affordable rates. Additionally, it offers reasonable flexibility in choosing components like the sum assured that can have an impact on the premiums. Take into account the needs of your family like children’s education while finalising the sum assured.

Flexible premium payment tenure

You do not have to worry about the financial burden of keeping the policy active with whole life insurance plans. The policyholder can decide the premium payment term. You can choose to pay the premiums on a monthly, quarterly, half-yearly or annual basis or a limited premium payment term depending on the product terms and conditions.

Tax benefits

Investing in a whole life insurance policy can provide you with a host of tax benefits. The premiums paid for the policy is eligible for a tax deduction of up to Rs 1.5 lakh in a year under Section 80C of the Income Tax Act, 1961. The death benefit and maturity benefits of a whole life insurance policy are tax-exempt under Section 10 (10D) of the income tax laws. The above tax benefits are subject to the provisions contained in Income Tax Act, 1961, as amended from time to time.

Types of whole life plans available in India

India is a large country with diversified insurance needs of different people. Various types of life insurance policies are available to cater to everyone’s needs.

1. Non-participating whole life insurance

It is an affordable option with level premiums and sum assured. There are no bonus payments in non-participating plans.

2. Participating whole life insurance

In contrast to non-participating plans, participating life insurance plans pay a bonus to the policyholder. The bonus is distributed from the profit that the insurer makes by investing the premiums paid by the policyholder in their Term or ULIP policies.

Who should opt for a whole life policy?

Individuals who want to fulfil long-term life goals like children’s weddings should opt for a whole life insurance option. If you are the sole earning member of the family, you should consider the whole life insurance plan as many people have to support their family even after retirement. Additionally, people who want to live a financially free life after retirement can also opt for the option as it comes with a partial withdrawal option, which depends upon the product terms and conditions.

Conclusion

A whole life insurance plan can help you take care of the financial obligations until you are alive. Investing in a whole life insurance plan when you are young can lead to substantial savings, as the premiums are lower for younger people. Conduct thorough research before investing in a life insurance policy. Consider your as well your family’s needs before deciding the sum assured.