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When you’re looking for life insurance policies, you’ll find the two most popular types of plans- term insurance and whole life insurance. While a term plan provides you with life cover for a specific duration, a whole life insurance policy covers you lifelong.
What is a Whole Life Insurance Policy?
A whole life insurance policy provides you with cover for life. The life cover amount is determined at the time of policy purchase.Mostly, the cover is provided until the policyholder becomes 100 years of age. The nominee will receive the cover amount when the insured person dies. However, if the insured person lives longer, then the insurer can pay the matured endowment cover to him/her. Furthermore, the policyholder can withdraw the policy at any time. Also Read: Different Types of Life Insurance Policy
Difference Between a Term Plan and Whole Life Insurance Policy
Coverage
A term plan provides the death benefit to the policyholder’s family in case of his/her death.A whole life insurance plans offers life cover and allows the policyholder to accumulate funds.
Premium
A term plan is considered the most cost-effective life insurance option.A whole life insurance policy’s premium tends to be higher than a term plan.
Tenure
A term plan’s duration is fixed. Mostly, the tenure is between 5 to 30 years.The tenure of a whole life insurance plan can be up to 100 years.
Maturity Benefit
Term insurance offers no maturity benefit.In case the policyholder survives the term of a whole life insurance plan, the insurer can offer the maturity benefit.
How Does a Whole Life Insurance Policy Work?
When an individual purchases a whole life insurance policy , he/she gets cover for 100 years. The policyholder’s sum assured will be determined when he/she buys the policy.If the insured person dies during the term, then his/her nominee can receive the life cover amount. However, policyholders can also receive survival and maturity benefit.The insurer can pay the matured whole life benefit to the policyholder. Therefore, a whole life insurance policy can help policyholders to create wealth for their family.
What are the Features of a Whole Life Insurance Policy?
The Premium Amount is Fixed
The premium amount of a whole life insurance policy doesn’t change during the tenure. Once the policy is purchased, it’s fixed for the entire term. For instance, if the premium at the time of policy purchase is Rs. 19,000 per year, then it’ll stay the same during the whole tenure.
Whole Life Cover
A whole life insurance plan is a great option to provide financial protection to the heirs of the policyholders. The life cover amount is paid when the policyholder dies. This payment can also be made when the policy matures.
Death Benefit
The death benefit is one of the most important reasons why people opt for whole life insurance policies. The death benefit amount is paid to the nominee when the policyholder passes away.
Tax Benefit
Another important benefit that the policyholder receives from a whole life insurance policy is tax benefits. Under Section 80C, a policyholder can get a tax deduction of up to Rs. 1.5 Lakh by investing in a whole life insurance plan. Also, the payout made to the nominee or the insured person is tax-free under Section 10(10D).
What are the Benefits of a Whole Life Insurance Plan?
It Can Provide Cover for Life
A whole life insurance policy provides cover for the longest duration. Unlike other life insurance plans that don’t offer lifelong cover, a whole life insurance policy can provide cover until the policyholder becomes 100 years of age.
It Can Help Accumulate Funds for Retirement
Building a substantial corpus is crucial to live a stress-free life after retirement. While a whole life insurance plan provides the death benefit, it can also offer survival benefit. In case the policyholder survives the term, the insurer can pay the matured endowment to him/her.For instance, a person purchases a whole life insurance policy for a tenure of 25 years. If he/she passes away during the term of the plan, then the nominees can receive the death benefit amount. However, in case the insured person survives, then he/she will be paid the survival benefit.
It Can Provide Regular Payments
When the policy matures, the insurer offers the accrued bonuses and the life cover amount to the policyholder. Furthermore, there are insurance providers that make regular payments as survival benefit.
In such a case, the accrued bonuses are provided as a lump sum once the premium payment term ends. After that, a percentage of the sum assured is paid until the insured person survives.
It Can Help the Policyholder Get a Loan
The surrender value of a whole life insurance policy increases with time. A policyholder can borrow a loan against the surrender value of the policy.
Get Whole Life Insurance for Longer Protection
Life insurance has become a necessity. With a whole life insurance plan, policyholders can provide financial security to their family. They can also accumulate funds for life after retirement with whole life insurance.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
