Buying life insurance is important as it ensures that you are financially secure to face any type of problem in life. If you are aiming to create a beneficial legacy for your family, you should consider whole life insurance. There are different kinds of life insurance plans but whole life insurance provides coverage to the policyholder for 99 years. It offers guaranteed death benefits to the nominee of policy in case of the unfortunate demise of the policyholder.
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What is Whole Life Insurance Policy?
Whole life insurance is the extension of the term insurance policy. In whole life insurance, the insurance coverage is provided till the death of the policyholder or till attaining 99 years of age. Since the coverage is for a complete lifetime, it is known as Whole life insurance. While the term insurance policy has a particular period for which the coverage is offered the whole life insurance policy is covered for the lifetime of the policyholder.
All the other terms and conditions would be the same as the term insurance policy except for the fact that the chances of getting the claim are higher in the whole life insurance as the coverage is till the death of the policyholder. Since the coverage is till the death of the policyholder, Survival benefit would be possible under the whole life insurance policy in rare cases if the policyholder survives the policy period.
How Does Whole Life Insurance Work?
Understanding how whole life insurance plans work can help you decide which plans are fit for you. Whole life insurance works similar to a term insurance plan which is a specifically designed life insurance plan which aims to provide whole life cover to the policyholder so that they can live a financially secured life and create financial support for the future, in case of accidental death.
Whole life insurance plans not only provide death benefits but also provides survival and maturity benefit to the policyholder. Every year, the policyholder pays a premium. In this premium amount, some amount is used for providing protection, and the remaining stay invested in the company. If a profit is earned, the policyholder is entitled to get the bonus on the invested amount. The investment grows in value and is returned to the insured if he selects to withdraw or live till the maturity of the plan.
Types of Whole Life Insurance Plans
There are different types of whole life insurance plans available in the market such as
Non-Participating Whole Life Insurance:
A non-participating whole life insurance policy is a traditional life insurance policy. It has a level premium and face amount during your entire life. The cost of non-participating whole life insurance policy is low and fixed costs and relatively low out-of-pocket premium payments. As a non-participating policy, the plan does not pay any dividend and does not receive any bonus facility.
Participating Whole Life Insurance:
Participating whole life insurance policy is also a traditional life insurance policy. Participating whole life policy pays dividends and offers benefits along with bonuses. In participating whole life insurance, the premium paid by the insured is invested by the company; the profit earned through the investment is paid as bonuses to the policyholder.
Level Premium Whole Life Insurance:
In level premium whole life insurance, the premiums are paid by the insured throughout the life until death. Risk-benefit is for the entire duration of life and the amount of sum assured is paid after the death of the insured.
Limited Payment Whole Life Insurance:
In Limited Payment Whole Life Insurance, the insured person will be required to pay premiums for a limited period and receive lifetime protection. In this type of life insurance plan, policyholders have to pay premiums for a specified number of years like 10 years, 20 years, etc.
SinglePremium Whole Life Insurance:
In a single premium whole life insurance plan, the entire premium of the life insurance policy is paid in a single lump sum and it is considered as an investment insurance product. In a single premium whole life insurance policy a large sum assured amount is paid as a guaranteed payment to the beneficiary of the policy.
Indeterminate Whole Life Insurance:
An indeterminate whole life insurance policy is an ordinary whole life insurance policy. It offers policyholders the option of adjusting their premiums. Based on its estimate of its current earnings, cost of expense and mortality, etc. In case there are any changes the insurer will charge policyholders the present premium amount.
Who Should Buy Whole Life Insurance?
A whole life insurance policy is preferred by a person who wants to cover their entire life against any unfortunate events and to pass the proceedings to their grandchildren. Technically the life insurance coverage should only be up to the age of 60 years or till the age of retirement. The need for financial security to the family arises if a person is working and after retirement, there would be retirement regular income which would be sufficient for the family and one achieves their financial milestones before retirement.
For instance, let us assume that a person wants to take a whole life insurance policy, and then he has the option to pay the premium for a particular period of years, say 5 years, and enjoy the coverage for whole life or pay the premium in regular instalments. In case of the death of the policyholder at the age of 80 years, the claim proceedings are paid to the family of the policyholder which can act as a pension amount to the spouse.
Eligibility Criteria of Whole Life Insurance:
The eligibility criteria of whole life insurance are differing from one insurer to the other. To get the details about the eligibility criteria for your chosen policy, you are advised to contact Policybachat customer service which has a dedicated team of agents to assist the customer. The basic eligibility criteria of a whole life insurance policy are
| Criteria |
Eligibility |
| Minimum Enter Age |
18 years |
| Maximum Entry Age |
65 years |
| Maturity Age |
99 years |
| Premium Payment Term |
Limited pay, Regular pay |
Features and Benefits of Whole Life Insurance Policy
- Financial Protection: A Whole life insurance policy helps to minimize the risk of financial difficulties which would be faced by the families in case of the sudden death of the policyholder. In whole life insurance, the insurance provider pays payment of guaranteed sum assured along with bonuses. As a result, even in the policyholder’s absence, his family stays protected.
- Whole Life Coverage: Whole life insurance provides life cover to the policyholder until 100 years of age. It offers guaranteed death benefits to the nominee of policy in case of the unfortunate demise of the policyholder.
- Guaranteed Premium: The premium interest rate of the whole life insurance policy is set for the entire tenure of the policy and it does not increase or decrease throughout the term period of the policy.
- Tax Benefits: Life insurance offers tax dual benefits under prevailing laws as per Income Tax Act, 1961. The life insurance premium paid can be availed as a tax deduction under section 80C. You can avail of a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act. The maturity insurance plans may be completely tax-free. This tax benefit is under Section 10(10D) of the Income Tax Act.
- Loan Facility: The insured can opt for a loan facility against the whole life insurance plan. However, a loan can only be availed if the insured completes 3 policy years and if all the premiums of the policy are dully paid.
- Long Term Savings: Apart from life insurance cover whole life insurance plans also offer you the opportunity to create wealth. Whole life insurance insurance plans help you to make systematic savings and create wealth that can be used for your future goals.
Whole Life insurance Riders
Whole life insurance riders help to enhance the protection provided by the policy. Some of the riders with whole life insurance policies are
- Critical illness rider
- Accelerated sum assured rider
- Hospital cash rider
- Partial/permanent disability rider
- Premium waiver rider
- accidental death & dismemberment rider
Whole Life Insurance vs Term Life Insurance
| Parameter |
Whole Life Insurance |
Term Life Insurance |
| Benefits |
It offers two benefits of both savings and protection |
It offers only death benefits. There are no additional benefits |
| Tenure |
It has the option to change the tenure of the policy |
It has a fixed tenure option |
| Premium |
High premium compared to term life insurance |
Low premium compared to whole life insurance |
| Premium Pay-out |
There is premium pay-out if the policyholder survives the policy period |
There is no refund of premium until a claim made the death of the policyholder |
| Bonus |
The amount of premium paid by the customer is used for both providing protection, and investment. If a profit is earned, the policyholder is entitled to get the bonus on the invested amount |
There are no such kind features in Term life insurance |
| Loan Availability |
The policyholder can opt for a loan facility against the whole life insurance plan. |
No loan availability in term life insurance plan |
Conclusion
Whole life insurance is an important decision that should be taken after careful consideration. When choosing a whole life insurance plan, it is important to consider factors such as the amount of coverage needed, the premiums, and the terms and conditions of the policy. It is also important to compare different plans from different insurers to ensure that you get the best deal for your needs. By taking all these factors into account, you can make sure that you are getting a plan that provides comprehensive coverage at an affordable price.
PolicyBachat is an online insurance web aggregator which helps in selecting insurance policies online for its customers based on the customer’s requirements. Please visit our portal to compare insurance policies from top life insurance companies and select the best life insurance policy which fits all your requirements.
Whole Life Insurance FAQ’s:
How to Use Whole Life Insurance to Create Wealth?
The whole life insurance policy provides life cover and financial protection for your family up to the age of 99 years. The policy then doubles up as an estate plan after your retirement. Thus, whole life insurance is a great tool for creating wealth.
Does Whole Life Insurance Pay Death Benefit and Cash Value?
Yes, whole life insurance death benefits to the nominee of policy in case of the unfortunate demise of the policyholder and you can acquire cash value after two consecutive policy years. If you need you can borrow money against the policy based on this cash value.
What Happens If You Cancel A Whole Life Insurance Policy?
When you cancel a whole life insurance policy, your nominee will no longer receive the death benefit when you die. If you had your whole life insurance for a long period you may also get some cash from the cash value of the policy.
Should I Get Term or Whole Life Insurance?
Term life insurance covers you for a specific period as per the policy term and offers a death benefit to the nominee in case of the death of an insured person. But the coverage ends, and the beneficiary doesn’t receive the money once the policy term expires. Whole life insurance is a type of permanent life insurance and the premiums of whole life insurance are much higher than term insurance as compared to term life insurance. This is because it offers lifelong coverage and offers a death benefit to the nominee in case of death of the policyholder.