What Does Whole Life Insurance Offer?
A whole life insurance policy or permanent life insurance offers policyholders coverage until the death of policyholders. If the insured person pays premiums, the policy remains active throughout the life.
At the time of policy purchase, the sum assured amount is decided. This amount is paid to the beneficiary at the time of the death claim if the insured policyholder dies. The normal maturity age is 100 years. If the insured member dies before the age of 100 years, the beneficiary will get the sum assured amount. But if the policyholder outlives the age of 100 years, the insurer will pay the maturity amount to the insured member.
How does whole life insurance work?
The pivotal objective of a whole life insurance policy is to inspire policyholders to lead a stress-free life so that they can create a legacy for their heirs.
A whole life policy not only comes with death benefits but also offers maturity and survival benefits along with lucrative bonuses. The insured policyholder is covered until death, and also enjoys the maturity benefit feature.
Types of whole life insurance policy
You may come across different types of whole life insurance policy variants. The policyholder can choose either a traditional whole life plan or a unit-linked plan. A traditional whole life insurance policy is further divided into two categories: non-participating and participating.
Non-Participating Whole Life Insurance: This low-cost life insurance policy comes with a level premium and fixed sum assured feature. Since it is non-participating, hence it doesn’t offer any bonuses.
Participating Whole Life Insurance: This is the opposite of a non-participating policy and here, you will receive bonuses. The company invests premiums paid. The profit that the company receives through these investments, savings left out of cost expense, etc. is distributed as a bonus to all insured policyholders.
The company doesn’t offer a guaranteed bonus every year. But if bonuses are declared, the policyholders will receive the same according to the terms and conditions of their policies. Sometimes, they receive bonuses in cash or the same gets accumulated and gets paid as a lump sum or it can be used in reducing the premiums. Very often the bonus can be used to purchase a paid-up additional sum assured, thereby increasing the sum assured amount.
There are several whole life insurance policies under these two broad categories of participating and non-participating.
Regular Premium Whole Life Insurance: Here, policyholders pay premiums until the death or throughout the policy term, the premiums remain fixed.
Limited Payment Whole Life Insurance: In this type of policy, the policyholder needs to pay premiums for a limited period. But the policy offers life protection coverage throughout the life or till age 100. Since it is a limited period; the premium amount is higher than other premiums for different whole life plans. You need to pay premiums for a fixed number of years, like 10 years, 20 years, and so on.
Single-Premium: In this type of whole life policy plan, a hefty amount of cash is paid as a payment guarantee to the nominee. Since a single-premium policy is completely funded, hence this type of policy offers a spectrum of benefits even after the sudden demise of the policyholder.
Some intriguing offers that you may get while purchasing a whole life insurance policy
Cover For Life
This type of policy plan offers coverage till the death of the life assured. The insured member is protected against all types of risks for his/her entire life or up to 100 years.
Assurance of Coverage
If you are the sole bread earner of your family, then who will take care of your dependents in case of your absence? A whole life insurance policy offers financial assistance to the family.
Periodic Payments
Once your policy matures, you will get the sum assured along with the accrued bonuses as a lump sum under the endowment option. Some whole life policies also offer survival benefits as periodic payments.
Tax Benefits
All premiums that you have paid towards your policy are tax exempted under Section 80C of the Income Tax Act, 1961. The payout given to the beneficiary is tax-free under Section 10(10D) of the Income Tax Act, 1961.
Serves as a source of cash
Many financial experts suggest that every person should keep a contingency fund that will help them to deal with various illnesses or support them in case of loss of income. A whole life policy offers a large amount that is received at the end of the premium payment term.
Loan Option Available
You can get loans against your whole life insurance plan. The surrender value increases with time; hence it implies you can comfortably borrow against the policy’s surrender value.
Your dependents will be benefitted
A whole life insurance plan for both partners will deliver extra financial support that can be utilized at the time of retirement. If any partner expires, the policy death benefit will go to the surviving partner. After the death of the insured person, the policy of the spouse will go a minimum bequest to children or grandchildren.
Whole life policy riders
Popular riders for whole life policies are critical illness riders; accelerated sum assured riders, hospital cash riders, partial/permanent disability riders, premium waiver riders, accidental death & dismemberment riders, etc.
The conclusion
Whole life insurance is a feasible option for everyone as this policy offers comprehensive cover and doesn’t have any age restrictions regarding eligibility. After the sudden demise of the policyholder, the beneficiary receives the payout or death benefit. Individuals, who want to accumulate funds for their post-retired life, should consider this type of policy.
