Life Insurance is a contract entered between the policyholder & the insurance company to cover contingencies like death, accident, disability, retirement, etc. This means that the beneficiary mentioned in the contract will get a specified amount from the insurer in the event of an unfortunate death.
Whole life insurance is a kind of life insurance that covers the entire life of the policyholder, i.e. about 99 to 100 years of age, guaranteeing the death benefits to beneficiaries upon their sudden demise.It helps protect the family members for their entire life. The partial premium paid by the policyholder is allocated towards the sum assured, & the remaining portion is invested. The amount of profit is paid to the policyholder if either they survive till the completion of the maturity period or they decide to withdraw the funds depending upon the fund’s performance. Also, some of the policies pay dividends to the policyholder, helping them achieve their financial obligations post-retirement.
Different Types of Whole Life Insurance Plans
Provided below are the different types of whole life insurance plans:
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Limited Payment Whole Life Policy
Under this plan, you are required to pay the premium amount for a limited time duration, like it can be paid for an initial 10-20 years & get coverage for up to 99 years.The premium amount is higher under this plan, but the savings on the premium amount are also on the higher side in comparison to a regular life insurance plan.
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Modified Whole Life Insurance
Under this plan, the policyholder has to pay different amounts at different intervals throughout the policy tenure. This means that the premium amount is comparatively lower initially & increases over a period of time. Also, the insurance benefits & the policy coverage remain the same, irrespective of the changing premium rate.
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Single Premium Whole Life Insurance
Under this plan, the premium amount is paid at the time of purchase of the policy in a lump sum or one single payment.
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Variable Whole Life Insurance
This plan covers the complete policy tenure, ensuring the financial security of all family members in case of the absence of a policyholder. Also, it helps fulfil the financial objectives by investing the funds.
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Joint Whole Life Insurance
This plan provides joint coverage to two individuals, where a premium amount is paid for two individuals & a sum assured is also provided for two individuals.
Benefits ofa Whole Life Insurance Plan
One of the key Benefits of Life Insurance through a whole life insurance plan is mentioned below:
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Lifetime Coverage
It provides lifetime coverage to the policyholder, i.e. up to 99/100 years of age. The sum assured would be paid to the beneficiary of the policyholder in case of their sudden demise, which will help meet the financial obligations of the family members.
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Fixed premium
Under this plan, the premium amount remains constant throughout the policy tenure.
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Lump Sum Benefit
The beneficiaries will receive the death benefit in case of sudden demise of the policyholder. An additional bonus will be received along with the lump sum amount of maturity benefit, provided the premium amount was duly paid to the insurance company.
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Support to Family members
It helps in wealth creation & accomplishing future goals, providing financial security & a healthy lifestyle to the family members.It provides a financial backup to the family members of the policyholder in case of their sudden demise.
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Loan Benefits
It helps get a loan facility in case of emergency funds requirement when the premium is paid for continuous 3 years towards the whole life insurance plan.
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Tax Benefits
A tax deduction can be availed against the amount of premium paid to the insurance company under section 80C of the Income Tax Act, 1961. Also, the death benefits received are also exempt from tax under section 10(10D) of the Income Tax Act, 1961.
Difference between Term Insurance Plan & Whole Life Insurance Plan
Provided below are the differences between a term insurance plan & a whole life insurance plan:
| Basis of Difference | Term insurance | Whole Life Insurance |
| Coverage | A term plan provides only death benefits in case of the sudden demise of the policyholder. | It helps in wealth creation & accomplishing future goals. |
| Premium rates | It provides the most affordable premium rates. | Here, the premium rates are higher than those of other regular-term plans. |
| Policy Tenure | A term plan provides coverage for a period ranging between 5 to 40 years. | It provides coverage till 99-100 years of age, i.e. for the whole life of the policyholder. |
| Loan Benefit | No loan can be availed as there is no cash value. | Here, loan benefits can be availed against the cash value. |
| Maturity benefit | There are no maturity benefits unless TROP is opted for. | Here, the maturity benefit is received in case the policyholder survives the policy tenure. |
| Additional Bonus | No additional bonus is received. | An additional bonus will be received along with the maturity benefits. |
| Suitable for | It can be bought by an individual who has dependents but will be financially independent in a few years. | It can be bought by an individual who has dependents & will remain financially dependent for a complete life. |
Conclusion
In a nutshell, a whole-life plan offers whole-life coverage & wealth creation to achieve financial objectives. It helps protect your family members & helps you plan for long-term savings. It is considered to be a comprehensive plan, which allows you to plan your family’s financial future, make a tax-effective investment, or look for long-term investment plans.
