A whole life insurance policy or permanent life insurance provides life coverage until the death of the life assured. The policy stays in force throughout the life as long as the life assured pays the premium. The sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim – when the life assured dies. Usually, the maturity age is 100 years. If the life assured dies before the age of 100 years, the nominee receives the sum assured. However, if the life assured outlives the age of 100 years, the insurance company pays the matured endowment coverage to the life insured.
Whole life plan is a unique life insurance plan. The main objective of a whole life insurance is to help the life assured live a worry-free life while being able to create a legacy for their heirs.
The reason being, it comes with not only death benefits, but also with maturity and survival benefits along with bonuses, if any. The life assured is covered until the death, and also has the maturity benefit feature.
There are different types of whole life insurance policy variants. The policyholder can opt for a traditional whole life plan or a unit linked plan. Traditional Whole Life plans are further categorized as participating and non-participating.
This means that on a whole life policy, the premium amount is set and guaranteed and not liable to vary throughout the life of the plan. So, in case, you are paying Rs. 2500 per month for your insurance, you will continue to pay Rs. 2500 per month forever.
In case of the death of an insured life, the policy being still in force and all premium payments being fully paid till date, the nominee will receive the total sum assured on the day of death along with applicable accrued bonuses, if any.
A whole life plan is mainly engineered to deliver estate to the heirs of the policyholder in the form of the payment of an assured sum together with bonuses, if any upon the policyholder’s death.
However, the whole life plan also delivers the payment of assured sums together with bonuses, if any in the form of maturity claims upon completing a stated age or upon expiry of the premium payment term from date of starting of the policy.
The premium paid towards the policy is tax exempted under the Section 80C of Income Tax Act, 1961. The pay-out made to the nominee/policyholder is also tax free under the Section 10(10D) of Income Tax Act, 1961.
You can obtain a loan against life insurance policy when the policy has completed 3 years. All traditional insurance policies such as the Endowment Plan, Money back policy and all can gather loans against the policy.
Whole life plan provides coverage until the death of the life assured. The insured is covered against the risk of death for his entire life or up to the age of 100 years.
If you – the breadwinner, were to pass away, who will take care of your dependents? The coverage of whole life insurance promises to be the financial source for the family.
Upon maturity of the policy, you get the promised sum together with the accrued bonuses as a lump sum under the endowment option. Alternatively, some plans also give you survival benefits in the form of periodic payments. This means that the total accrued bonus till the completion of the premium payment term is given as lump sum and then a percentage of the sum assured is paid out till the life insured survives or completion of the policy term.
The premium paid towards the policy is tax exempted under the Section 80C of Income Tax Act, 1961. The payout paid to the nominee is tax free under the Section 10(10D) of Income Tax Act, 1961.
Experts believe that people should usually keep aside six to nine months of expenses in liquid form to be utilised in times of emergency such as illness, or job loss. While it is not easy to maintain such a large repository of money, a whole-life plan delivers a large amount which is received at the end of the premium payment term.
Since, the whole life covers the life assured for the entire life, one can opt for loan against the whole life insurance plan. Moreover, with time the surrender value increases, which means you can borrow against the policy’s surrender value - a better option than mortgaging home.
Whole life plans are a great option at helping you leave a legacy for tomorrow. For instance, a whole-life plan on both the spouse will deliver an extra financial resource that can be depended upon at a later part of retirement. In case one of the spouse dies, the policy death benefit will go to the surviving spouse.
Further, the policy of the spouse will go on to deliver a minimum bequest to children or grandchildren after the insured person's death. This makes whole-life plans a good idea for future planning of wealth creation and its passing to the heirs.
Broadly, there are two different types of Whole Life Insurance Policies, each having different features. One can select as per one’s requirement. Let's read further about different types of whole life insurance.
Non-Participating Whole Life Insurance: A non-participating whole life plan is a low-cost life insurance policy with a level premium and face amount feature. It does not pay any dividends nor does receive any bonuses as it is non-participating.
Participating Whole Life Insurance: As opposed to the non-participating whole life plan, this is a participating whole life insurance policy, wherein, you may receive bonuses. In this plan, the premiums are invested by the company. The profit or the excess amount that the company has earned through various investments, savings left out of cost expense, etc. is distributed as bonus to all policyholders.
However, there is no guarantee of bonuses being declared every year. But if bonuses are declared they become a part of the amount payable and the policyholder receives the same as per the terms and conditions declared. It can be cash payouts or accumulated and paid as a Lumpsum or can be used to offset premiums to be paid i.e. help in reduction of premiums or will be allowed as an investment in the company, which will help you to gain interest at a specified rate. The other option is, bonus declared which can be used to purchase paid-up additional sum assured, thereby enhancing the face amount.
Level Premium Whole Life Insurance: In this payment plan, premiums are paid regularly till the insured is alive. The premiums remain constant throughout the policy term.
Limited Payment Whole Life Insurance: The policyholder pays the premium for a limited period of time, under the Limited Payment Whole Life Insurance plan. But, the life protection cover is for the whole life or till age 100.The difference is not only the duration of premium payment, but also the amount. Since, it is limited period, the premium amount is relatively higher than the regular premium whole life plan. Premiums payment period are usually for a fixed number of years, say 10 years, 20 years, and so on.
Single Premium: A whole life plan where a large sum of cash is paid as payment guarantee to the beneficiary. While a single-premium policy is fully funded, the money invested builds up rapidly, making for quite a large benefit even in the event of policyholder's sudden demise.
Max Life Whole Life Super plan is a participating whole life insurance policy that allows sure shot protection up to 100 years of age together with bonus additions that contribute to growth of investment. The plan is a limited premium paying policy which gives the option of including extra riders and raising the risk cover.
The features of this plan are as under:
The eligibility criteria of this plan is
The SBI Life Shubh Nivesh is a non-linked profit endowment assurance policy that has full life coverage option. This is a savings income - insurance cover plan put together, to allow you to save regularly for the future and to also receive maturity benefits as lump sum/regular payments.
The features of this plan are as under:
The eligibility criteria of this plan is
HDFC Life Sampoorn Samridhi Plus Plan gives an option to choose between an endowment- Lump sum amount payable at the end of policy term, and endowment with whole life -Lump sum amount payable at the end of policy term plus sum assured that is payable upon survival until 100 years of age/death.
The features of this plan are as under:
The eligibility criteria of this plan is
IDBI Federal life insurance has brought the whole life savings insurance plan as an all-weather plan that allows for you to live life to the fullest and live your dreams with a couple of massive pay-outs. The first of these pay outs happens at the end of your premium payment term and second when your age is hundred years of age. Besides, this policy allows you to leave behind a legacy for your family as well as financial security in case of your absence.
The features of this plan are as under:
The eligibility criteria of this plan is
Whole life insurance is a suitable form of protection for a number of individuals. Every earning individual should plan to provide financial protection to their family.
Why Whole Life Insurance is a good option?
It covers the life assured until he dies or for whole life or till age 100. Plus, it gives an opportunity to leave a legacy for your heirs.
Can I borrow money against the whole life insurance policy?
Yes, you can borrow loan against your whole life insurance policy provided it has acquired a surrender value.
Should I buy whole life insurance for my child?
No. It is not necessary, to buy it for your child. The main purpose is to provide the death risk coverage to the breadwinner, as an untimely death of the breadwinner could put the family in financial crunch.
Is whole life insurance a good investment for retirement?
Yes, as whole life provides a facility of partial withdrawal any time after the completion of premium payment term, whichever comes later. These withdrawals may have bonuses, overall it supports your retirement planning.
What is the maximum amount I can avail as tax benefit?
As per the Section 80C of Income Tax Act, 1961, all the premiums paid towards the policy are tax exempted. The maximum amount that you can avail is Rs.1,50,000.
Is Whole Life Insurance suitable for senior citizens?
No. But, if purchased at an early stage of life, helps in retirement planning.
How can I pay premium after I retire?
You don’t have to pay premiums. As by the time one officially retires, the premium payment term is usually over. So, you need not worry.
What if I surrender the Whole Life Insurance policy?
In this case, the life insurance company will pay you the surrender value. It may differ from one to another.
How much coverage should I opt for while buying Whole Life Insurance?
You must assess your needs, check the disposal amount to pay as premium amount, analyze the money you may wish to leave as a legacy, consider inflation too before you fix the coverage. However, it is generally suggested to opt for a coverage as 15-20 times the annual income.
Are there any riders available with Whole Life Insurance?
Yes, most of the life insurance companies do offer riders under whole life insurance plan. There are many different riders available, however, the most common ones are:
What is the Eligibility Criteria to Buy Whole Life Insurance?
The life insurance policyholder should be financially independent and must be above the age of 18 years. The maximum entry age is 60 to 65 years of age.
Early withdrawals are allowed under whole life plan policy?
Yes, most often it’s feasible to take out limited cash amounts from a Unit Linked whole life insurance policy. This amount differs as per the policy you have invested in and the provider.
Can I surrender my whole life policy in exchange for its cash value?
Yes. However, when you surrender your policy in return for the cash value, you make the life insurance segment invalid. Meaning that your beneficiary will not get the death benefit.
Whole life insurance policy suitable for after retirement income?
Yes. A whole life insurance policy will build cash value that can be utilised as retirement fund. The survival benefits paid can provide you a regular stream of income to meet your post retirement financial needs.
What is Death Benefits under whole life insurance policy?
An insurance carrier will give a total death benefit for the amount insured as long as the policy is effective and the premiums are up to date.
Term insurance plan can be convertible in whole life insurance policy?
Yes. You can convert a term policy to a permanent policy as long as the conditions of the policy have been understood and the premium payments have been timely. It also depends whether the term insurance plan that you hold provides you the option of converting it into a whole life plan.
What will be the premium rate for a whole life insurance policy as I become older?
Premiums will remain constant throughout the tenure of the plan.
