Whole Life Insurance

What is Whole Life Insurance?

A whole life insurance policy is in effect a permanent life insurance policy and it provides insurance coverage until the demise of the insured person. The whole life policy stays in effect throughout the life of the person insured, so long as they continue to pay the premium. The amount of coverage is defined when the policy is purchased and is paid back to the nominee at the time of the demise of the assured person.Normally, the maturity of the whole life policy is 100 years. If the person assured dies earlier, the nominee is given the sum assured. But, if the person assured survives the age of 100, the insurance provider pays the matured whole life policy coverage to policyholder.

How Does Whole Life Insurance Work?

Whole life insurance is a popular type of life insurance policy. Whole life insurance is also known as straight life or ordinary life plan. This policy’s primary goal is to help the policyholder live a stress-free life. It is also known for providing the policyholders with the chance to create financial security for their heirs. Whole life insurance provides maturity and life benefits in addition to death benefits. The cherry on top is that different whole life insurance plans come with their own unique benfits.

There are two types of whole life insurance policy, namely :

Traditional whole life insurance plan :

This whole life insurance policy is invested in government bonds and low-risk funds and further divided into participating and non-participating plans.

Unit Linked premium whole life insurance plan :

Premiums for Unit lined whole life insurance policy are invested in a mix of high-risk equity and debt funds.

Features of Whole Life Policy

The main features of a whole life insurance plan are as follows :

Death Benefits :

If the whole life policy is still in force at the time of the death of the assured, and if all the premiums have been paid, then the nominee is given the full sum assured on the day the insured person dies, along with the bonus if it has accrued.

Whole Life Protection :

A whole life insurance plan is primarily devised to provide the heirs of the assured some financial security by payment of the sum assured alongwith any bonus which has accrued on the death of the policyholder. But, if the insured happens to survive the stated age, the sum assured is paid out in the form of a maturity claim.

Guaranteed Premium :

A guaranteed premium means that the premium you start paying at the inception of the policy will remain unchanged throughout the term of the policy, meaning that if you start paying a premium of Rs 3000 in the beginning, your premium will remain Rs 3000 till the end of the policy.

You Can Take A Loan Against A Whole Life Policy :

After the whole life policy has been in force for 3 years, you can take a loan against it.

Advantages of Whole Life Insurance Policy

Full Life Cover :

Benefits of whole life insurance policy provides coverage for the whole life, right until the death of the person whose life is insured. The insured is provided coverfor theirwhole life or till 100 years of age.

Guaranteed Coverage :

The logic is that if the insured person passes away, their dependents should have a financial bolster to fall back on. If it were not for the whole life insurance cover, the dependents could be left high and dry.

Periodic Payments :

When the policy matures, you get the sum assured plus bonus in lump sum, but you can choose a plan which gives you survival benefits, which means that the total bonus accrued till the time of completion of premium payments is paid in lump sum, while a percentage of the sum assured is given periodically for the remainder of the life assured or till the completion of the term of the policy.

Tax Breaks :

Section 80C of Income Tax Act, 1961, exempts from tax the premium paid towards a whole life insurance policy, and even the payment made to the nominee is exempted from tax Section 10(10D) of IT Act.

Loan Can Be Availed Against Whole Life Policy :

As thewhole life policycovers the assured for theirwhole life, the policy is eligible for raising a loan against it. Besides, as the policy gets older, its surrender value also increases. So, you can take a loan against the whole life insurancepolicy’s surrender value, which is a much better option than taking a loan by mortgaging your home.

Benefits for The Dependent :

Once you have taken out a whole life insurance policy, you can rest assured that your dependents will be taken care of after your demise. So, you don’t have to worry about what will become of your spouse or children after your demise.

What are the Different Types of Whole Life Insurance Policy? :

The different types of Whole life insurance include :

• Whole life insurance for children
• Whole life insurance with a limited payment
• Modified Whole life insurance
• Paid-up Whole life insurance
• Simplified Whole life insurance policy, and
• Whole life insurance with a Single Premium.

Non-Participating Whole Life Insurance :

Non-participating whole life insurance policies do not pay dividends to policyholders; instead, the insurer determines the level of premium, death benefits, and cash surrender values at the purchase time. These amounts are set at the time that the whole life insurance policy is issued. Premiums are typically lower than other types of whole life insurance available.

Participating Whole Life Insurance :

The other type of permanent life insurance is participating whole life insurance. It guarantees your life cover as you continue to pay the whole life insurance policy premiums. Whole life insurance premiums remain constant throughout the premium-paying period, so your expenses to sustain the whole life insurance policy would not rise as you age or encounter health issues. Aside from the life cover, whole life insurance includes tax-advantages that really can assist you in expanding your estate. The cash value that piles up in your whole life plan grows tax-free each year. This allows the policyholder to "participate" in the profits of the whole life insurance policy company. Every year, the company compares its profit to the actual claims and expenses of the participating investment fund for the whole life policy you have opted for. These profits are then passed on to you (the policyholder) for your whole life plan.

Non-Participating Whole Life Insurance :

Non-participating whole life insurance policies do not pay dividends to policyholders; instead, the insurer determines the level of premium, death benefits, and cash surrender values at the purchase time. These amounts are set at the time that the whole life insurance policy is issued. Premiums are typically lower than other types of whole life insurance available.

Level Premium Whole Life Insurance :

Under this plan the premium to be paid on the whole life insurance policy remains unchanged throughout the term of the policy. So, the amount you start paying as premium, say for example Rs 3000, will remain Rs 3000 till the end of the term of the policy; it will not be increased with each passing year.

Limited Payment Whole Life Insurance Plan :

Under this plan, the holder of the policy pays premium for a specific period, not necessarily for the whole term of the policy, but the cover remains for the whole term, say 100 years or the whole life. As premium under this plan has to be paid only for a limited period, the amount of the premium tends to be relatively high.

Single Premium :

Under this plan of whole life insurance, the insured has to pay only a single large premium, which is like a one-time investment. Since the amount of the premium is large, the investment builds up quickly, resulting in a substantial benefit for the dependents of the insured even if the insured should happen to pass away soon.

Indeterminate Premium :

Under this whole life insurance plan, there is a two-pronged premium rate charged to the policyholder. At first, a high premium rate is charged from the policyholder for a few years, which is invested by the insurance provider, who use a portion of the earnings for it to reduce the premium rate for the policyholder over the following years.

Should you Buy a Whole Life Term Insurance Plan?

Yes, one should go for the Whole Life Term Insurance Plan as it has many advantages that few other policies can provide, including :

• Longer Coverage :
  A whole life term plan is a whole life policy that provides coverage till death, or age 99, whichever is earlier.
• Affordable Option :
  It is significantly less expensive than a traditional whole life cover, which is an endowment plan.
• Additional Benefits :
  Provides long-term whole life insurance policy benefits, including coverage during your post-retirement period.

Who Should Buy a Whole Life Insurance Policy?

Some people do require whole life insurance or permanent life insurance. There could be a family history of terminal illnesses, in which case, getting a whole life policy while you are healthy and young is the best choice. Once you purchase the whole life policy, you have it for the rest of your life. The whole life insurance policy benefits and premium are both fixed for life, providing a degree of certainty that other policies cannot. Below are the reasons why you should buy whole life insurance plans :

When a forced savings plan is required :

"Buy term and invest the difference," financial planners always say. If you are the type of person who can save money, this is a winning strategy.

When you're over 50 or approaching it :

Another major issue with the term-based insurance policies is that rates go up as you get older. The payments for a whole life insurance policy, on the other hand, remain the same all through the whole life policy coverage period, i.e., for your entire life, making it a great “saving for retirement” strategy.

Purchasing for children :

When it comes to purchasing a policy for one’s children, a whole life policy may be a better option. The premiums will be exceptionally low because they are so young.

Whole Life Insurance based on your lifestyle :

This whole life policy can be considered when you have a special child, or your estate has a liquidity problem, charitable intent, need for additional diversification, etc.

Riders in Whole Life Insurance Policy

Most whole life insurance plans have what are called ‘riders’ which are elective benefits attached to them. Different insurance companies have different riders, they may or may not have the same riders and the terms and conditions attachedto each rider may also differ from company to company.Some riders, on the other hand, may be more or less similar in the whole life insurance plans of most companies. Below are listed some riders which are found in most whole life insurance policies :

Terminal illness benefit :

This is a rider which stipulates that the payout will be made when a terminal illness is diagnosed in the insured policy holder. A terminal illness is different from a critical illness, and is most likely to lead to the demise of the person. If the sum assured of the insured is Rs. 50 lakhs, this much amount will be paid out when the terminal illness is detected.

Permanent disability benefit :

This rider stipulates that future premiums will be waived off if the insured happens to suffer from a permanent disability. The sum assured of the whole life policywill be kept intact but future premiums do not have to be paid.

Accidental death benefit :

As per this rider, an additional amount will be paid out if the insured’s death happens to be the result ofan accident. For instance, if the sum assured of the policy holder is Rs 50 lakhs, and it carries an accidental death benefit cover of Rs. 15 lakhs, then the sum disbursed by the insurance company will be Rs. 65 lakhs if the death of the insured is the result of an accident.

Critical illness benefit :

As per this rider, if the insured person is diagnosed with a critical illness, like suffering a heart attack, kidney failure, or any kind of cancer, the insurance company will make the payout which will help the insured fight the illness. Say you have purchased a whole life insurance policy with a critical illness rider of Rs. 25 lakhs, then if and when you are detected to have a critical illness, the insurance company will you the Rs. 25 lakhs immediately so you can use it for your treatment.

Lumpsum or income payment :

A person who buys a whole life insurance has the option to go in for the rider which stipulates that their nominee will be paid a monthly income rather that a lump sum amount upon their demise. This will beneficial in case the nominees have no other source of income and are going to be totally dependent on the payout/s from the whole life insurance as it will help them meet monthly expenses and properly organize their future.The income thus received is exempted from income tax under Section 10(10)(D).

How To Buy a Whole Life Insurance Plan Online?

Once upon a time, buying a whole life policy used to be a time-consuming process, requiring the buyer to fill out numerous forms and standing in lines. Nowadays, anyone with a device that has internet access can register for a whole life insurance policy.

We at Bharti AXA Life Insurance offer strong technical support with a myriad of services matching all your needs for the whole life policy. The online services range from paying the premiums, tracking the online status of your policy, editing your personal information, downloading the statements which are hassle-free, and more.

The online buying process for existing customers :

• Step 1 : Click on the login button in the centre of the page.
• Step 2 : Once you log in, you will find a drop-down. Select a customer login page and you will be directed to the page.
• Step 3 : As you are an existing customer enter your credentials and access your account.
• Step 4 : After a successful login, you can access all your policy details.

The online buying process for new customers :

• Step 1 : There is a registration step. You will need to add your contact details like phone number, e-mail ID, and date of birth to register. NRIs can register only with an e-mail ID.
• Step 2 : After registration, one needs to verify themselves by the generation of an OTP. You need to click on the new page and then click on the option of generating an OTP. That OTP will be sent on your registered number or e-mail ID.
• Step 3 : Once you logged into your account successfully, you will be able to access all your policy details under the “View Policy details” option.