Whole life insurance is a specially tailored life insurance plan that seeks to offer whole life cover to the insured so that they may live a financially secure life. These policies help establish a financial cushion for the future. These life insurance plans offer the policyholder a death benefit as well as a maturity and survival benefit. The policyholder can select from several types of whole life insurance offered by life insurance firms based on their requirements.
How Do Whole Life Policies Work?
Every year, the insured pays a premium, and a portion of this is utilised to provide protection, while the rest is invested in the firm, if it’s a participating plan. If a profit is made, the policyholder is entitled to a bonus on the amount invested. The investment rises in value and is repaid to the policyholder if he withdraws or survives until the plan matures. To summarise, whole life plans provide life insurance for the duration of one's life (usually upto age 100) and aid in the accumulation of assets. This is a fantastic choice to have in your investing portfolio.
The Advantages of Having the Best Whole Life Insurance Policy
Full Life Insurance
A whole life insurance policy provides coverage for the entire life of the person whose life is insured, up until the person's death. In other words, the insured receives coverage for the rest of their lives or until they reach the age of 100.
Guaranteed coverage ensures that if the insured individual dies, their dependents have some financial support. The dependents might be left high and dry if not for the whole life insurance coverage.
Section 80C of the Income Tax Act of 1961, currently, exempts the premium paid towards a whole life insurance policy from tax, and Section 10(10D) of the Income Tax Act exempts the payment made to the nominee from tax. Tax laws are subject to amendments.
Benefits for Dependents
When you get a whole life insurance policy, you can rest assured that your dependents will be taken care of in the event of your death. So, you don't have to be concerned about what will happen to your spouse or children once you're no longer around.
Because the whole life insurance protects the assured throughout their lives, it may be used to secure a loan. Furthermore, as time passes, the surrender value of the policy rises. As a result, you may borrow against the surrender value of your whole life insurance policy, which is a far better alternative than mortgaging your property.
Different Types of Whole Life Insurance Policies
1. Whole Life Insurance Participation
In contrast to non-participating whole life insurance policies, participating life insurance policies provide bonuses. The firm invests the premium paid by the insured under this plan, and the profit produced from the investment is distributed to the insured as bonuses.
2. Pure Whole Life Insurance
The premiums for this plan are paid continually throughout the insured's life till death. The risk benefit lasts for the period of the insured's life, and the sum assured is paid after their death.
3. Limited Payment Whole Life Insurance
Policyholders are expected to pay the policy's premium on a regular basis throughout the duration of the plan under Limited Payment Whole Life Insurance. For the duration of the insurance, the premium remains unchanged. Here the insured pays a certain amount of premiums for a set number of years or until a set age is reached. However, risk cover is available for the insured's whole life.
4. Single Premium Whole Life Insurance
The entire policy premium is paid in one lump sum under the Single Premium Whole Life Insurance plan. A sizable sum assured amount is given as a guaranteed payment to the policy's nominee.
5. Indeterminate Premium
The policyholder is charged a two-tiered premium rate under this whole life insurance plan. For the first few years, the policyholder is charged a high premium rate, which is invested by the insurance provider, who uses a portion of the gains to lower the policyholder's premium cost in subsequent years.
A whole life insurance policy is an excellent investment option for individuals who want to gain a return on investment while also securing lifetime coverage.
*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.