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Whole Life Insurance

A whole life insurance policy or permanent life insurance provides life coverage until the death of the life assured. The policy stays in force throughout the life as long as the life assured pays the premium. The sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim – when the life assured dies. Usually, the maturity age is 100 years. If the life assured dies before the age of 100 years, the nominee receives the sum assured. However, if the life assured outlives the age of 100 years, the insurance company pays the matured endowment coverage to the life insured.

How Does Whole Life Insurance Work?

Whole life plan is a uniquelife insurance plan. The main objective of a whole life insurance is to help the life assured live a worry-free life while being able to create a legacy for their heirs.

The reason being, it comes with not only death benefits, but also with maturity and survival benefits along with bonuses, if any. The life assured is covered until the death, and also has the maturity benefit feature.

There are different types of whole life insurance policy variants. The policyholder can opt for a traditional whole life plan or a unit linked plan. Traditional Whole Life plans are further categorized as participating and non-participating.

Features of Whole Life Policy

Guaranteed Premium

This means that on a whole life policy, the premium amount is set and guaranteed and not liable to vary throughout the life of the plan. So, in case, you are paying Rs. 2500 per month for your insurance, you will continue to pay Rs. 2500 per month forever.

Death Benefits

In case of the death of an insured life, the policy being still in force and all premium payments being fully paid till date, the nominee will receive the total sum assured on the day of death along with applicable accrued bonuses, if any.

Protection for Life

A whole life plan is mainly engineered 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.

However, the whole life plan also delivers the payment of assured sums together with bonuses, if any in the form of maturity claims upon completing a stated age or upon expiry of the premium payment term from date of starting of the policy.

Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961

The premium paid towards the policy is tax exempted under the Section 80C of Income Tax Act, 1961. The pay-out made to the nominee/policyholder is also tax free under the Section 10(10D) of Income Tax Act, 1961.

Loan can be availed against whole life policies

You can obtain a loan against life insurance policy when the policy has completed 3 years. All traditional insurance policies such as the Endowment Plan, Money back policy and all can gather loans against the policy.

Benefits of Whole Life Policy

Cover For Life

Whole life plan provides coverage until the death of the life assured. The insured is covered against the risk of death for his entire life or up to the age of 100 years.

Assurance Of Coverage

If you – the breadwinner, were to pass away, who will take care of your dependents? The coverage of whole life insurance promises to be the financial source for the family.

Periodic Payments

Upon maturity of the policy, you get the promised sum together with the accrued bonuses as a lump sum under the endowment option. Alternatively, some plans also give you survival benefits in the form of periodic payments. This means that the total accrued bonus till the completion of the premium payment term is given as lump sum and then a percentage of the sum assured is paid out till the life insured survives or completion of the policy term.

Tax Benefits

The premium paid towards the policy is tax exempted under the Section 80C of Income Tax Act, 1961. The payout paid to the nominee is tax free under the Section 10(10D) of Income Tax Act, 1961.

Serves as A Source of Cash

Experts believe that people should usually keep aside six to nine months of expenses in liquid form to be utilised in times of emergency such as illness, or job loss. While it is not easy to maintain such a large repository of money, a whole-life plan delivers a large amount which is received at the end of the premium payment term.

Loan Option Available On Your Whole Life Plan Policy

Since, the whole life covers the life assured for the entire life, one can opt for loan against the whole life insurance plan. Moreover, with time the surrender value increases, which means you can borrow against the policy’s surrender value - a better option than mortgaging home.

Your Dependents Will Benefit from This Plan

Whole life plans are a great option at helping you leave a legacy for tomorrow. For instance, a whole-life plan on both the spouse will deliver an extra financial resource that can be depended upon at a later part of retirement. In case one of the spouse dies, the policy death benefit will go to the surviving spouse.

Further, the policy of the spouse will go on to deliver a minimum bequest to children or grandchildren after the insured person's death. This makes whole-life plans a good idea for future planning of wealth creation and its passing to the heirs.

Types of Whole Life Policy

Broadly, there are two different types of Whole Life Insurance Policies, each having different features. One can select as per one’s requirement. Let's read further about different types of whole life insurance.

  • Non-Participating Whole Life Insurance: A non-participating whole life plan is a low-cost life insurance policy with a level premium and face amount feature. It does not pay any dividends nor does receive any bonuses as it is non-participating.

  • Participating Whole Life Insurance: As opposed to the non-participating whole life plan, this is a participating whole life insurance policy, wherein, you may receive bonuses. In this plan, the premiums are invested by the company. The profit or the excess amount that the company has earned through various investments, savings left out of cost expense, etc. is distributed as bonus to all policyholders.

    However, there is no guarantee of bonuses being declared every year. But if bonuses are declared they become a part of the amount payable and the policyholder receives the same as per the terms and conditions declared. It can be cash payouts or accumulated and paid as a Lumpsum or can be used to offset premiums to be paid i.e. help in reduction of premiums or will be allowed as an investment in the company, which will help you to gain interest at a specified rate. The other option is, bonus declared which can be used to purchase paid-up additional sum assured, thereby enhancing the face amount.

  • Level Premium Whole Life Insurance: In this payment plan, premiums are paid regularly till the insured is alive. The premiums remain constant throughout the policy term.

  • Limited Payment Whole Life Insurance: The policyholder pays the premium for a limited period of time, under the Limited Payment Whole Life Insurance plan. But, the life protection cover is for the whole life or till age 100.The difference is not only the duration of premium payment, but also the amount. Since, it is limited period, the premium amount is relatively higher than the regular premium whole life plan. Premiums payment period are usually for a fixed number of years, say 10 years, 20 years, and so on.

  • Single Premium: A whole life plan where a large sum of cash is paid as payment guarantee to the beneficiary. While a single-premium policy is fully funded, the money invested builds up rapidly, making for quite a large benefit even in the event of policyholder's sudden demise.

  • Indeterminate Premium: This is a kind of whole life policy that has two premium rates. First, a maximum guaranteed rate and second, a lower rate. The carrier charges the lower premium rate while the policy is invested in for the first time. After maintaining that rate for a given time period, the insurer utilises its actual mortality, interest, and expense experience to establish a new premium rate that may vary from the previously premium rate.

Best Whole Life Insurance Policies in India

Max Life Whole Life Super

Max Life Whole Life Super plan is a participating whole life insurance policy that allows sure shot protection up to 100 years of age together with bonus additions that contribute to growth of investment. The plan is a limited premium paying policy which gives the option of including extra riders and raising the risk cover.

The features of this plan are as under:

  • Maturity Benefit: On completion of the policy term you will get a guaranteed payout along with applicable bonuses as the Maturity Benefit.
  • Death Benefit: On death during the policy term, your nominee will receive a guaranteed payout along with applicable bonuses as the Death Benefit and the policy will terminate.
  • Bonus Payout Options: You have the option to receive the annual cash bonus announced byMax Life Insurancein three different ways depending on your needs.
  • Terminal Illness Benefit: In case of any terminal illness, 50% of the Guaranteed Maturity Sum Assured is paid immediately upon policyholder’s request.
  • Tax Benefit: You may be entitled to certain applicable tax benefits on your premiums and policy benefits.

The eligibility criteria of this plan is

  • Minimum Age at Entry (Age at Last Birthday): 18 years
  • Maximum Age at Entry (Age at Last Birthday): 50 years
  • Policy Term: Upto age 100 years of Life Insured
  • Premium Payment Terms: - 10/15/20 years
  • Guaranteed Maturity Sum Assured: Minimum - Rs. 50,000 / Maximum - No limit
  • Premium Limits: Minimum - Rs. 8,500 / Maximum - No limit (subject to underwriting)

SBI Life Shubh Nivesh

The SBI Life Shubh Nivesh is a non-linked profit endowment assurance policy that has full life coverage option. This is a savings income - insurance cover plan put together, to allow you to save regularly for the future and to also receive maturity benefits as lump sum/regular payments.

The features of this plan are as under:

  • Avail life cover for up to 30 years or whole life depending on your insurance needs
  • Simple reversionary bonuses throughout the policy term
  • Two plan options – endowment option and endowment with whole life option
  • Option to receive the basic sum assured as a lump sum or as regular income, at maturity
  • Get comprehensive coverage at an affordable cost with three rider options

The eligibility criteria of this plan is

Whole Life Insurance Eligibility

HDFC Life Sampoorn Samridhi Plus - Whole Life Insurance

HDFC Life Sampoorn Samridhi Plus Plan gives an option to choose between an endowment- Lump sum amount payable at the end of policy term, and endowment with whole life -Lump sum amount payable at the end of policy term plus sum assured that is payable upon survival until 100 years of age/death.

The features of this plan are as under:

  • Sampoorn Samridhi Plus plan is part of Par (Life) fund, 22% of which was invested in Equities as at 31st March 2017. This equity proportion is at the fund level and would be different for an individual policy and would vary during the term of the policy.
  • Limited premium endowment plan with an option to extend life coverage up to 100 years under whole life coverage
  • Limited premium payment term equal to policy term less 5 years
  • You have the flexibility to choose a policy term from 15 to 40 years
  • Guaranteed Additions up to 5% p.a. of “Sum Assured on Maturity” for first 5 years
  • The plan participates in the profit of the participating fund by way of bonuses from the 1st year
  • Get an additional sum assured in case of accidental death during the policy term
  • You have the flexibility to choose the premium payment frequency i.e. monthly/quarterly/half-yearly/annual
  • Tax Benefit under Section 80C and Section 10(10D) of Income Tax Act, 1961
  • Get additional protection by opting for HDFC Life Critical Illness Plus Rider that provides Rider Sum Assured in case diagnosed with any of the 19 Critical Illnesses

The eligibility criteria of this plan is

  • ENTRY AGE- MIN 30 days / MAX 60 yrs
  • MATURITY AGE- MIN 18 yrs / MAX 75 yrs
  • POLICY TERM- MIN 15 yrs / MAX 40 yrs
  • PREMIUM PAYMENT TERM- Policy Term less 5 years
  • GUARANTEED ADDITION- 3% p.a for policy term equal to 15-19 years 4% p.a for policy term equal to 20-24 years 5% p.a for policy term equal to 25 years or more

IDBI Federal Lifesurance - A Whole Life Savings Insurance Policy

IDBI Federal life insurancehas brought the whole life savings insurance plan as an all-weather plan that allows for you to live life to the fullest and live your dreams with a couple of massive pay-outs. The first of these pay outs happens at the end of your premium payment term and second when your age is hundred years of age. Besides, this policy allows you to leave behind a legacy for your family as well as financial security in case of your absence.

The features of this plan are as under:

  • Safeguard your savings with guaranteed additions
  • Added Bonus to boost your savings
  • Get double protection with Accidental Death Benefit
  • Enjoy discount on premium
  • Get tax benefits on premiums paid
  • Maturity benefit: On maturity of your policy, you receive maturity sum insured plus vested guaranteed additions plus vested reversionary bonuses, if any, plus terminal bonus, if any.
  • Death Benefits: On death of the life insured during the policy term, the payout includes death sum insured plus vested guaranteed benefits plus accrued till date of death plus vested reversionary bonuses accrued till date of death plus interim bonus, if any plus terminal bonus, if any.

The eligibility criteria of this plan is

  • Age at entry of life insured (last birthday)- 18 Years (Min)|55 Years (Max)
  • Age at Maturity: 55 years -75 years (Max)
  • Premium (in Rs.): 10,000 (Yearly) / 5,000 (Half Yearly) / 2,500 (Quarterly) / 1,000 (Monthly) (MIN) / Max No limit (subject to underwriting)
  • Premium Payment Term: 5 yrs. (Min) / Equal to policy term (Max) (If Policy Term – 15 / 20 / 25 years) Fixed 5 yrs./ (If Policy Term – 10 years)
  • Premium Payment Frequency: Monthly/Quarterly/Half yearly/Annually

Who Should Opt For a Whole Life Policy?

Whole life insurance is a suitable form of protection for a number of individuals. Every earning individual should plan to provide financial protection to their family.

  • Individuals who wish to provide a legacy to their heirs.
  • Financial portfolio should consist a whole life plans too, as it provides an opportunity of returns along with the life coverage.
  • Be financially independent after you retire, as a whole life plan comes with a partial withdrawal option.
  • Someone who is keen on TAX SAVING PLANS, whole life plans are good to have, as all the premiums paid are tax exempted.

Whole Life Insurance FAQs

Why Whole Life Insurance is a good option?

It covers the life assured until he dies or for whole life or till age 100. Plus, it gives an opportunity to leave a legacy for your heirs.

Can I borrow money against the whole life insurance policy?

Yes, you can borrow loan against your whole life insurance policy provided it has acquired a surrender value.

Should I buy whole life insurance for my child?

No. It is not necessary, to buy it for your child. The main purpose is to provide the death risk coverage to the breadwinner, as an untimely death of the breadwinner could put the family in financial crunch.

Is whole life insurance a good investment for retirement?

Yes, as whole life provides a facility of partial withdrawal any time after the completion of premium payment term, whichever comes later. These withdrawals may have bonuses, overall it supports your retirement planning.

What is the maximum amount I can avail as tax benefit?

As per the Section 80C of Income Tax Act, 1961, all the premiums paid towards the policy are tax exempted. The maximum amount that you can avail is Rs.1,50,000.

Is Whole Life Insurance suitable for senior citizens?

No. But, if purchased at an early stage of life, helps in retirement planning.

How can I pay premium after I retire?

You don’t have to pay premiums. As by the time one officially retires, the premium payment term is usually over. So, you need not worry.

What if I surrender the Whole Life Insurance policy?

In this case, the life insurance company will pay you the surrender value. It may differ from one to another.

How much coverage should I opt for while buying Whole Life Insurance?

You must assess your needs, check the disposal amount to pay as premium amount, analyze the money you may wish to leave as a legacy, consider inflation too before you fix the coverage. However, it is generally suggested to opt for a coverage as 15-20 times the annual income.

Are there any riders available with Whole Life Insurance?

Yes, most of the life insurance companies do offer riders under whole life insurance plan. There are many different riders available, however, the most common ones are:

  1. Accidental Death Benefit
  2. Accidental Total and Permanent Disability
  3. Waiver of premium
  4. Critical illness

What is the Eligibility Criteria to Buy Whole Life Insurance?

The life insurance policyholder should be financially independent and must be above the age of 18 years. The maximum entry age is 60 to 65 years of age.

Early withdrawals are allowed under whole life plan policy?

Yes, most often it’s feasible to take out limited cash amounts from a Unit Linked whole life insurance policy. This amount differs as per the policy you have invested in and the provider.

Can I surrender my whole life policy in exchange for its cash value?

Yes. However, when you surrender your policy in return for the cash value, you make the life insurance segment invalid. Meaning that your beneficiary will not get the death benefit.

Whole life insurance policy suitable for after retirement income?

Yes. A whole life insurance policy will build cash value that can be utilised as retirement fund. The survival benefits paid can provide you a regular stream of income to meet your post retirement financial needs.

What is Death Benefits under whole life insurance policy?

An insurance carrier will give a total death benefit for the amount insured as long as the policy is effective and the premiums are up to date.

Term insurance plan can be convertible in whole life insurance policy?

Yes. You can convert a term policy to a permanent policy as long as the conditions of the policy have been understood and the premium payments have been timely. It also depends whether the term insurance plan that you hold provides you the option of converting it into a whole life plan.

What will be the premium rate for a whole life insurance policy as I become older?

Premiums will remain constant throughout the tenure of the plan.