Everything You Should Know about Whole Life Insurance

Aug 21, 2019 | 2 months ago | Read Time: 3 minutes | By iKnowledge Team

Life insurance acts as a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. Human life is a fragile thing and is perennially exposed to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is a loss of income to the household. Of course, it is not possible to put a monetary label on the life of a person, but having a financial cover helps to deal with the emotional loss. One such plan is the Whole Life Insurance Plan. Let’s dive deeper into the whole life variant of life insurance plans.

What is a Whole Life Insurance Plan?

Also referred to as straight life plan, it simply means that the plan stays functional throughout the whole lifetime of the life assured. The only precondition is that the premiums should have been paid. The sum assured is paid to the nominee or beneficiary as listed in the policy document in the unfortunate event of the death of the life assured.

A whole life policy has two components, namely, the death benefit paid out to the dependents or beneficiaries in the event of the death of the assured life and second, a savings element that brings periodic pay-outs. You can withdraw the policy or even borrow a loan against the policy without impacting the rest of the policy terms, including the death benefits.

As against term insurance plans that only last for a fixed duration, whole life policies intend to cover you for life. You can buy a whole life plan with a one-off sum or a premium that is paid regularly on a monthly or yearly basis.

You can opt for whole life insurance if you will be able to make premium payments for a considerable time going into the future or as a part of your estate planning efforts.

Benefits of a Whole Life Insurance

Cover for Life

Unlike the term insurance plans, a whole life policy provides you life cover for the entire life. Term insurance plans expire after a period of time and getting another policy is expensive at a later age. In the unfortunate event of your untimely death, the nominees are paid a lump sum but if you outlive the term of the policy, you receive no returns at all under a pure insurance product. A whole life policy extends the cover for a longer tenure – even as far as 100 years.

Assurance of Life Coverage 

Whole life policy brings the unique benefit of an additional financial source for your family. A whole life policy is designed in a way 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. The return will prove to be an additional financial source in the family. Thus, your dependents will benefit from this plan.

Periodic Payments

A whole life plan delivers the payment of assured sums together with bonuses, if any, in the form of maturity claims upon completing a specified age or upon expiry of the premium payment term.

Tax benefits

Tax benefits are also available to the insured under Section 80C and Section 10(10D) of the Income Tax Act, 1961. Thus, the premium paid towards the policy allow for deductions and the pay-outs are tax-free in the hands of the beneficiary.

Loan Options Available on Your Whole Life Plan 

One of the key features of a whole life policy is that it opens up an avenue for borrowing against the policy. The surrender value of the policy increases over time and you can borrow against the policy’s surrender value at any time.

Thus, a whole life policy has its benefits for someone who is looking at it from an estate planning perspective. By serving the dual purpose of insurance and investment, it combines the best of both world and ensures protection for a longer time in the future.

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