Since childhood, we’ve been protected by our parents in one way or another. Whether we were stuck in a medical emergency or any financial situation, our parents always had our backs. Isn’t it? Now, as we’ve grown up, we look for the same support and protection that were given to us by our parents in childhood. The solution to what you are looking for is a “whole life insurance policy.” You must be wondering what exactly it means. In this article, we’ll guide you all about the whole life insurance policy in India. Continue reading to find out more!
What is a Whole Life Insurance?
A whole life insurance plan is a life insurance product under which the policyholder can get insurance coverage for a lifetime if premiums are timely paid. Under this life insurance plan, if the policyholder dies during the policy tenure, then his beneficiaries are entitled to a guaranteed death benefit. The policyholder chooses the sum assured when they buy the policy. It is also known as a “permanent life insurance policy” and provides the dual benefit of life insurance and a bonus to the policyholders. The insured can enjoy the policy benefits for a lifetime by paying a premium to the insurance company only during the first 10–15 years of the policy’s initiation.
Let’s understand in detail with a whole life insurance policy example. If you buy a whole life insurance policy at 30 years of age for a sum assured of Rs. 30 lakhs, you may have to pay a premium until you reach the age of 45 and enjoy the benefits of the policy for your entire life. However, this may vary depending on the premium payment modes you choose at the time of policy purchase. Therefore, the policyholders may have to pay a high premium for their policy.
Benefits of a Whole Life Insurance Policy
Listed below are some of the key benefits of a whole life insurance policy.
- Guaranteed Lifetime Coverage:
Unlike other life insurance plans where the coverage is provided only for a limited duration, the insured gets coverage for the entire life in a whole life insurance policy. In this type of plan, the insured gets both maturity and death benefits.
- Bank For Retirement:
Considering the inflation in all sectors, especially the healthcare industry, it is crucial to create a source of income for your golden years. A whole life insurance plan will provide you with lifetime coverage and ensure that you have a corpus of funds for your future.
- Periodic Payments:
The policyholders get a maturity benefit along with an earned bonus at the time of plan maturity. In addition, a lot of life insurance policies also give out regular payments as maturity benefits. Therefore, the policyholders can either choose to receive the maturity benefit in a lump sum or periodically at regular time intervals.
- Tax Benefits:
Under Section 80C of the Income Tax Act, the policyholders can avail themselves of tax benefits on a premium paid towards their life insurance policy. Furthermore, an insured is also eligible for a tax deduction on maturity benefits.
How Does a Whole Life Insurance Policy Work?
Whole life insurance policies work differently from other life insurance plans. You can purchase this plan by paying a premium either in a lump sum or on a monthly or yearly basis. If you purchased a unit-linked whole life insurance policy, a portion of your premium will be allocated to your whole life insurance policy, while the remainder will be invested in the investment portfolio. In simple terms, whole life insurance plans are savings and protection plans that help individuals accomplish their lifetime financial goals.
Types of a Whole Life Insurance Policy
Here are five categories under which whole life insurance plans are classified.
- Non-Participating Whole Life Insurance Plan:
Under this type, a life insurance policy does not provide any dividend or bonus facility to the policyholders. Moreover, it is a low-cost life insurance plan that provides a face amount feature and a level premium.
- Participating Whole Life Insurance:
These are savings and investment whole life insurance plans, where a premium that is paid by the policyholder is invested by the insurance company. As a result, the profits received from investments are given to the policyholders in the form of bonuses.
- Pure Whole Life Insurance Plans:
The policyholders pay the premium throughout the policy period, i.e., their lifetime. The risk coverage is given to the policyholders for their entire lives, and the sum assured is only given at the time of the insured’s death.
- Limited Payment Whole Life Insurance:
The policyholder pays a one-time premium but receives coverage for the rest of their life. The policy premium remains constant for your entire life.
- Single Premium Whole Life Insurance:
Under this whole life insurance policy, a premium is paid in a lump sum by the policyholders at the time of policy initiation.
Who Should Buy a Whole Life Insurance Policy Riders?
Whole life insurance is the most suitable protection plan for the individuals listed below.
- You are planning for your retirement and looking for investment opportunities.
- You want to plan your estate, leave savings to your beneficiaries, and transfer your wealth.
- You are a young professional who has started earning and is looking for a savings plan.
Conclusion
A whole life insurance policy is a protection plan that will provide you with lifetime coverage. It is a great tool that will safeguard you and your family in the event of any mishaps. There are numerous insurance companies providing whole life insurance policies. You can compare and choose the best one for yourself.