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Whole Life Insurance: Everything You Need To Know

Published On Apr 19, 2021 12:00 AM By InsuranceDekho

A whole life insurance refers to an insurance policy where a policyholder is covered for their life by an insurance provider. The main objective of a whole life insurance is to offer financial assistance to the life assured and their dependants.

It comes with a death benefit, a maturity benefit and survival benefits along with other services. There are two main kinds of whole life insurances such as a traditional whole life plan and a unit linked plan. A policyholder has the option of choosing a plan that is best suited to their financial requirements.

The policy remains in force so long as all premiums are paid by the policyholder. The sum assured is decided at the beginning of policy term and is paid to the nominee after the death of the life assured. In such policies, the maturity age is usually 100 years and if the policyholder dies before the stipulated period, the death benefit is paid to the nominee. In case the policyholder survives the entire tenure of the policy, the insurance company pays a matured endowment coverage to the nominee.

Let us now look at the key features, benefits and types of whole life insurance policies that are available in the market -

Key Features of Whole Life Insurance Policies

The following are some of the key features of whole life insurance policies -

1. Fixed Rate of Premium

Whole life insurances have a fixed rate or premium from the commencement of the policy which remains the same throughout the tenure of the plan. 

2. Death Benefit

Whole life insurance plans come with a death benefit that is payable to the nominee of the life assured on the unfortunate or untimely death of the policyholder, that will be payable if all premiums have been paid to the company.

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3. Whole Life Protection

As the name suggests, whole life insurances ensure financial protection for your entire life, till a period of 100 years. If the policyholder outlives the tenure of the policy, they can receive attractive bonuses and maturity endowment funds in conjunction with the sum assured amount. 

4. Loan Facility

This feature in whole life insurance plans offer the policyholder the facility to avail loans from an insurance company after the first 3 years of policy commencement. This is a better alternative against borrowing from other financial bodies. 

5. Tax Benefits

Premium payments made towards whole life insurance plans are exempted from taxation and the premium refund pay out made to the nominee or the policyholder is also tax free. These are promised under Section 80C and Section 10(10D) of the Income Tax Act, 1961. 

Benefits of Whole Life Insurance Policies

The following are a list of benefits that are available to whole life insurance policyholders:

1. Life Coverage Benefit

This feature under whole life insurance plans offers complete life coverage to the policyholder till the age of 100 years. The life assured is protected against the risk of death and acts as a financial source of income for their family. 

Also Read:- What is the Best Age to Buy Life Insurance?

2. Cash Benefit

Whole life insurance plans come with a large amount of cash payment benefit at the end of the premium paying term. This feature allows the life assured or their nominee to access liquid cash and utilise in times of medical or financial emergency, by solving the problem of maintaining a large depository of cash funds. 

3. Loan Benefit

Policyholders of the whole life insured plans can avail a loan benefit against the insurance plan. 

4. Periodic Payout Benefit

Whole life insurance plans come with a hefty sum insured at maturity and the nominee or the life assured has the option of receiving the payment either in a lump sum format or as an endowment fund. Some plans also offers survival benefits in the form of periodic payments where the total bonus at the end of the policy tenure is given out as lump sum and a percentage of the same is paid till the completion of the policy term. 

Types of Whole Life Insurance Policies

The following are a detailed account of a few kinds of whole life insurance policies -

1. Non Participating Whole Life Insurance

This kind of whole life insurance plan is a low-cost life insurance plan with a fixed rate of premium. It does not have any dividends nor pay any bonuses. 

2. Participating Whole Life Insurance

In contrast to the former one, this policy offers premiums and the premiums are invested by the company. The profit or excess earned by the company through different investments and money market instruments are shared among all policyholders.

However, there is no guarantee that a policyholder will be entitled to a bonus each year. In case a bonus is declared, they are assimilated as part of the sum assured  and the policyholder can receive the same either as a lump sum or in periodic payout installments. 

3. Level Premium Whole Life Insurance

In this kind of a life insurance policy, the rate of premium remains fixed throughout the policy and must be paid till the survival period of the life assured. 

4. Limited Payment Whole Life Insurance

This type of whole life insurance requires a policyholder to pay the premium for a limited period of time but the protection or coverage is offered for the entire tenure of the policy. Since it has a limited period of premium payment, the rate of premium is comparatively higher than other plans. The premium payment term is for a fixed number of terms such as 10 years, 20 years and so on. 

5. Single Premium Whole Life Insurance

A single premium whole life insurance offers a lump sum cash benefit to the life assured or the policyholder. The policyholder can invest in this whole life insurance plan and it reaps impressive returns. These funds can be collected as part of the death benefit or the sum assured in the occasion of the policyholder's untimely death. 

6. Indeterminate Premium Whole Life Insurance

An indeterminate whole life insurance comes with two premium rates namely, a maximum guaranteed rate and a lower rate of premium. This feature allows the policyholder to invest his funds at the lower rate of premium for the first time and after a certain period of time, the investor has the option of reflecting on the mortality charges, interest rates and other expenses in deciding a new premium rate, different from the previous one. 

Best Whole Life Insurance Policies of India

The following are a list of some of the most well known whole life insurance plans in India:

  1. Max Life Whole Life Super
  2. SBI Life Shubh Nivesh
  3. HDFC Life Sampoorn Samridhi Plus Whole Life Insurance
  4. IDBI Federal Lifesurance
  5. ICICI Pru Whole Life

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