A Whole Life Insurance Policy
is a contract that provides you insurance coverage for your entire life, as depicted by the name itself. In this policy, you are required to pay premiums regularly for 10-15 years and the insurance cover is extended to you as long as you live (up to 100 years). For instance, if you are 30 years old and you opt for the whole life plan whose sum assured is 10 lakh INR, then you would stop paying the premium when you are 45 years of age but the coverage would last for your entire life.
It not only provides life coverage but offers bonuses too. The premium is paid only for a limited duration and therefore, it is high. It includes insurance and investment components. The insurance component pays a pre-determined amount when the insured individual dies. The investment component builds an accumulated cash value the insured individual can borrow against or withdraw in the form of bonuses.
Whole life insurance is a suitable form of protection for a number of individuals. You can opt for whole life insurance if:
- You want to make investments towards your post-retirement requirements and are seeking for opportunities to invest in.
- You own an estate and wish to plan and leave your estate and savings to your beneficiaries and transfer your wealth.
- You are a young professional who has just started off your career and will be able to make premium payments for a considerable time going into the future.
- Limited Premium:
Under the Limited Payment Whole Life Insurance, you will be required to pay premiums for a limited period of time but will receive lifetime protection. Depending on the policy, the last premium-paying year can be decided at the beginning of the policy.
- Single Premium:
Under the single premium whole life insurance policy, you have to make the premium payment in a single lump sum in the beginning of the policy, which provides with a significant loan value and immediate cash value, making it an investment product. It is a hassle-free policy if you have paid the premium because you do not have to worry about the premium payment for the entire life.
- Level Premium:
Under the level premium whole life insurance policy, you are required to pay fixed premiums throughout your life. The premiums collected in the early stages of this policy are sufficient to pay for the insurance protection costs. The surplus funds, inclusive of the interest earnings will contribute towards any shortfalls in premiums at a later stage when the annual premium payments may not be enough to cover the insurance costs.
- Modified Premium:
It is more or less similar to the traditional whole life policy. The difference lies in the premium structure. In the traditional one you have to pay premium throughout the life of the policy but in modified premium policy the premium is generally lower in the first five to ten years of the policy after that it becomes a bit higher than the traditional whole life policy.
Whole Life Policy comes with the following advantages:
- It protects you for your entire life and provides death benefits as well in exchange for limited premiums.
- It offers annual bonuses along with guaranteed sum assured.
- Tax benefits are available under Section 80C and Section 10(10D) of the Income Tax Act, 2016.
- The surrender/cash value of the whole life policies increases over time which serves as a cash reserve, providing financial security.
- You can borrow your cash value when you are in need of money.
- It facilitates wealth creation which will, in turn, benefit your family and other dependents in adverse circumstances.
Whole Life Insurance has many positive aspects, but you cannot ignore the following disadvantages:
- It is very much expensive than term life insurance. The premiums are very high as compared to term or other types of life insurance.
- It is more complicated than term insurance. You require a very careful research or consult a qualified insurance advisor to buy the right policy.
- You have to pay premiums continuously for at least ten to fifteen years to build a fair amount of cash value of the policy.
- It has a lock-in period of 5-10 years before which you cannot withdraw from the policy, withdrawal is restricted to merely 75% of the cash value.
Following riders are commonly available with the whole life policy:
Steps to buy whole life policy online:
- Critical Illness rider
- Hospital cash rider
- Partial/permanent disability rider
- Premium waiver rider
- Accidental death & dismemberment rider
- Accelerated sum assured rider
Below listed are the five simple steps you need to follow while buying a whole life policy online:
Step-1:- You need to log in to company’s website from which you need to buy the policy.
Step-2:- Next, you need to choose the required type of policy from the available ones, by comparing the features of each and every policy.
Step-3:- After that you need to choose the coverage/ sum assured and provide all the details accurately.
Step-4:- Now the premium will be determined by the insurance company on the basis of the details filled by you.
Step-5:- You are then required to pay the premium online using debit card, credit card or net banking facilities available and the policy will be issued.
Whole Life vs. Term Life:
Difference between whole life and term life is listed in the following table:
No doubt, Whole Life Insurance will always be there for your family, no matter how old you may become. You know exactly what your premium payments will be and you can leave a handsome corpus with your family after you pass away. But it is essential to consult a properly licensed and credentialed Certified Financial Planner before buying whole life insurance to know the plan which is most suitable for you according to your needs.