Whole life insurance plans and its salient features
A whole life insurance policy is also known as permanent life insurance. It provides life coverage throughout life. Under such policy, the sum assured is paid to the nominee in the event the insured dies. Usually, the maturity age for this policy is 100 years. If the insured lives past the maturity age, the insurer will pay out the matured endowment coverage to the life insured.
Features of whole life policy
Protection for life
Whole life insurance plans are specifically designed to provide life protection to the family of the insured. In case of death of the life insured, the nominee would get the sum assured along with accrued bonuses.
Fixed premium
It is important to buy the right amount of life cover after assessing your financial obligations such as a child’s education, marriage, loans, or other forms of debt. Buying such a plan can help your family or dependents to maintain their lifestyle and fulfill the set financial goals even after your untimely demise.
Periodic payments
Under such plans, the policyholder receives the survival benefits in the form of periodic payments. When the policy matures, the insured will get the promised sum assured along with the accrued bonus as a lump sum amount.
Death benefits
In the event of the uncertain demise of the insured during the policy term, the death benefit will be paid to the nominee. The insurer will pay the nominee the total sum assured on the day of death along with the accrued bonuses if any.
Tax benefits
Premiums paid towards a whole life insurance plan qualify for tax benefits under section 80C of the Income-tax Act, 1961. So, policyholders can claim a deduction up to Rs 1.5 lakh towards the premium. Also, the pay-out made to the nominee/policyholder is also tax-free under Section 10(10D) of Income Tax Act, 1961.
Loan facility is available
The policyholders can also avail of a loan against their whole life plans. However, the loan can only be availed if the policy has completed 3 years and you have duly paid the premium amount towards your policy till date.
What are the types of whole life insurance plans?
Non-participating whole life
It is the simplest and lowest-cost form of whole life insurance. In such policies, policyholders do not receive dividends, because they are not participants in the interest, dividends, and capital gains earned by the insurer on premiums paid.
Participating whole life
In this form of life insurance, policyholders receive dividend pay-outs which are generated from the profits of the insurer by selling the policy. They are typically paid out on an annual basis over the life of the policy.
Level premium whole life
It is one of the most common forms of whole life insurance. Here, the premiums are calculated based on the policyholder’s whole life (up to age 95 or 100), and the policyholder pays an equal premium amount every month throughout life.
Limited payment whole life
In this form of policy, the policyholders can choose to pay the full premium in a shorter time frame – for example, in 10 or 20 years. Remember, due to a short payment schedule, premium payments are higher than the ordinary whole life plan.
Single premium whole life
Under the single premium whole life plan, the policyholders need to make the premium payment in a single lump sum. The payment needs to be made by the life insured at the time of the policy issuance. Since the policy is fully paid upfront in one large payment, there is no requirement to pay any further premiums.
Indeterminate premium whole life
Under this form, the policyholders can adjust their policy premium payments. The insurance company will charge a current premium based on its current estimate of investment earnings, mortality, and expense costs.
Smart tips to get a whole life insurance plan
Assess life cover
It is important to buy the right amount of life cover after assessing your financial obligations such as child’s education, marriage, loans, or other forms of debts. Buying such a plan can help your family or dependents to maintain their lifestyle and fulfil the set financial goals even after your untimely demise.
Consider inflation factor
Before buying a whole life cover, do not forget to consider inflation in mind. A cover of Rs 50 Lakhs may not be of enough value somewhere 30 years later. Thus, it is essential to buy a whole life cover that can easily take care of the financial needs of your family when you are not there.
Invest early
The premium amount for a whole life plan primarily depends on the entry age, so it would be a wise move to buy a whole life policy during your early stage of life. When buying it at a younger age, your insurer will offer you a whole life policy at lower premiums.
Choose appropriate add-ons
Add-on covers are the benefits that enhance the coverage of your policy. It is imperative to choose the add-ons that are appropriate for covering life risk. These additional covers are available at an extra cost, so you need to choose it carefully.
Choose insurer wisely
Whole life insurance is a long-term contract, it is, therefore, important to choose the right insurer that can help you to cater to the financial needs of your family, especially in your absence. You should check the reputation and claims settlement ratio of the insurer while choosing them.
Read policy terms
Before you buy a whole life plan, it is vital to go thoroughly through the policy terms & conditions, its benefits, and inclusions & exclusions. It helps you in assessing the plan and you can then easily make the right decision to buy.
What is no medical whole life insurance?
It is insurance in which the policyholder gets the whole life cover without undergoing any medical exam. It makes the whole process of purchasing the insurance policy faster and easier for the policyholder. No medical whole life insurance is a good option for people at any age who are in generally good health.
How does no medical whole life insurance work?
Instead of taking a medical exam and going through a long approval process, people can buy no medical whole life insurance by going through an application process after answering a few simple questions about their health and medical histories.
It is important to answer all the health questions honestly and accurately. Based on that the insurance company will decide how much coverage they will offer you and what premium price you would be paying to them.
Who should buy whole life insurance?
You can opt for whole life insurance if:
- You are looking for permanent insurance coverage that will last for the duration of the policyholder's life.
- You have made investments towards your post-retirement requirements and are looking for other opportunities to invest in.
- You are a young professional who has started with their career and will be able to make premium payments for a considerable time going into the future.
