What Is Whole Life Insurance Policy?

What Is Whole Life Insurance Policy? Whole life insurance is also known as traditional, original or straight life insurance. It works during the whole life period of the insured and premiums are continued to be paid. It provides permanent benefit of coverage till the death of the insured for the lifetime and also provides financial security to the family of the insured in case of his premature death. This policy has the maturity age of 100 years. The policy can be withdrawn by the insured at any time. Its aim is to provide financial security to the future generation of the insured by providing the whole life cover. The policy will become matured endowment in case the insured do not die before the age of maturity of the policy. Under the whole life insurance policy, the death benefit is tax-free.

Key Features of Whole Life Insurance Policy

  • In contrast to term life insurance, which is only valid for a predetermined number of years, whole life insurance offers coverage that lasts for the entire lifetime of the insured individual, making it uniquely different in this regard.
  • In the event that the policy remained active at the moment of the insured individual’s passing, whole life insurance will disburse the designated beneficiaries with the agreed-upon payout.
  • The owner of a whole life insurance policy has the unique flexibility to access funds from the cash savings component of the policy through either withdrawals or loans.
  • A distinctive feature of a whole life insurance policy is that its cash value typically accrues interest at a consistent fixed rate.
  • Death benefits are reduced by any unpaid principal and interest on a loan.

Benefits Of Whole Life Insurance Policy

Before purchasing the whole life insurance policy, you need to know the benefits it covers. The benefits of the policy are mentioned below:

Death Benefit

  • In case of the premature death of the policyholder before the maturity of the policy, the nominee or beneficiary will get the death benefit as the total sum assured by the insurance company, only when all the premiums are paid properly by the deceased policyholder. If accrued bonus is applicable in this situation, then the amount will be paid along with it.

Whole Life Cover

  • The insured’s whole life is covered under this policy, which means till the age of 99 or 100 years. In the event of premature or unfortunate demise of the insured, this policy guarantees death benefit to the beneficiary of the insured.

Protection for Life

  • This life insurance policy is designed in such a way that it provides lifetime security to the insured’s family by paying the guaranteed amount of assured sum along with the bonuses if any.

Guaranteed Premium

  • This policy contains a fixed rate of premium, which neither increases nor decreases throughout the policy’s term period. For example, Preeti pays a premium of Rs. 3000 per month, then she has to pay the same amount of premium regularly for the entire term of the policy.

Tax Benefits

  • The Income Tax Act, exempts the premium paid by the insured from tax in the whole life insurance under section 80C and section 10 (10D) of the same act exempts the maturity claims from tax.
Also read: What Is The Property Insurance And How It Works?

Types of the Whole Life Insurance Policy

The whole life insurance plan is of different kinds, which are as follows:

Participating Whole Life Insurance

  • A participatory whole life policy’s dividend payment is its distinguishing characteristic. Dividend payments fundamentally represent the excess profits that the company has amassed through investments, cost savings, and favorable organizational mortality. The receipt of dividends by policyholders is not guaranteed. If dividends are paid, however, they will be made in the form of cash and either used to reduce the amount of the premium payment or permitted to accumulate and earn interest at a certain rate.

Non-Participating Whole Life Insurance

  • The non-participating whole life insurance policy has a constant premium and face value for the course of your lifetime. Such a policy’s fixed costs and comparatively low cash premium payments are advantageous. The dividends are not paid in this policy because this is a non-participating policy.

Limited Payment Whole Life Insurance

  • With this kind of coverage, there are greater premiums in the beginning and lower or nil premiums in the later years.

Single Premium Whole Life Insurance

  • This type of whole life insurance is the most basic and essential form. Insofar as premiums are paid, coverage is provided in exchange for the fixed premium that the insured pays.

Modified Premium Whole Life Insurance

  • This kind of whole life insurance promises cheaper premiums early in the policy’s duration, the opposite of a restricted payment policy.

How Purchasing The Whole Life Insurance Policy Has Become A Good Choice Recently?

Life expectancy is rising. On the other hand, unanticipated occurrences like the worldwide pandemic along with other natural calamities have demonstrated how crucial it is for people to make plans for the future. Due to its extensive coverage period and assurance of the sum assured, as well as the fact that the death benefit is paid much past the average life expectancy, whole life insurance has become a well-liked investment choice.

Whole life insurance plans, with their short premium-paying terms, provide the ideal response for this modern mentality that believes in working hard for a few years merely to complete one’s obligations.

What Is The Cost Of Whole Life Insurance Policy?

Whole life insurance often requires significantly larger premiums compared to term insurance. According to research, the typical monthly cost for a whole life insurance policy can range from hundreds to more than a thousand dollars per month, based on elements including Coverage levels vary based on the insured’s age, gender, and other factors.

Contrarily, most insured people pay term life insurance premiums that are in the tens of dollars on average, though they can be more for those who are older and have higher policy limits.

Conclusion

Coverage for 99 years of your life. A personalized premium payment schedule that is fixed for the duration of the plan. The chance to increase one’s income both before and after retirement. Riders that are optional and cover expensive crucial and lifestyle diseases. Benefits from taxes on the premium paid and the amount assured. With such a plethora of advantages, a whole life plan should absolutely be included in your financial strategy.

Also Check out: What Is Term Life Insurance Plan?