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.