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Whole life insurance provides coverage throughout the life of the life assured. This insurance plan protects you and your family by providing a life cover for up to 99/100 years. This can help secure the financial interests of your loved ones in your absence. In addition to paying a tax-free death benefit, the whole life policy contains a component of savings in which cash value may be accrued.
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A whole life policy is a type of life insurance that offers coverage for the policyholder's entire lifetime, i.e., 99 or 100 years. It guarantees a death benefit to be paid to the nominees/beneficiaries upon the policyholder's death. It thus is a suitable choice for individuals who want to secure their loved ones for their whole lives. Additionally, this plan offers a savings element in the form of cash value accumulation, making it suitable for long-term financial planning.
Note: Whole life insurance plans are different from term insurance plans. While term plans only offer death benefits and no cash value accumulation benefit, whole life insurance plans offer lifelong protection for the nominees and cash value accumulation as well.
Term Plans
* Whole life insurance covers the life assured for their entire lifetime, unlike term life insurance, which is limited to a specific number of years.
* Most whole life policies come with a level premium, meaning that the monthly premium payment remains constant.
* Additionally, whole life insurance includes a cash savings component called the cash value, which the policy owner can access or borrow against.
* The cash value generally accrues interest at a fixed rate. However, withdrawals and outstanding loan balances will reduce the death benefits.
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Let us understand how whole life insurance example works:
Neeraj, a 30 year old non-smoking male, bought a whole life insurance plan from Policybazaar to financially secure his loved ones. He earns Rs. 12 Lakhs per year and, thus, chose a life cover of Rs. 1 Crore for a policy term of 99 years. To enjoy the coverage benefits of the whole life policy, he would have to pay a monthly premium of Rs. 2,168 for the entire policy term. In case he suffers an unfortunate death during this tenure, the insurer will payout the sum assured of 1 Crore to his nominees, which will help them take care of their financial needs.
A whole life policy ensures the financial stability of the nominee in case of the policyholder’s unfortunate death, whenever it may happen. It means that there is a policy term limit under whole life insurance, and thus, the plan covers the policyholder for his/her whole life (till 99/100 years of age). Most whole life plans provide a dividend to the policyholder, which helps with retirement. These life policies provide insurance until the death of the assured. Whole life policies are classified into.
Under this option, if you choose a limited payment whole life insurance plan, you are required to pay the plan premium for a limited time during the policy tenure. In most cases, you can pay the amount for the first 10/20 years and continue to get covered for 99 years. The premium rates for these plans are slightly higher but the total savings on premium amounts would be higher than a regular life insurance plan payment.
Under this plan option, the entire premium of the policy is paid in one go or as a lump sum payment at the time of policy purchase. Since the premium is paid all at once, no other premium payments have to be made throughout the policy tenure.
A joint whole life policy provides coverage to two individuals instead of one. The premium amount is paid for both the plan owners, and the sum assured amount is provided for both lives. The payout from life insurance plans are right for couples who are planning to save for the financial requirements of their children in case of their absence.
If you choose a modified whole life policy, you pay different amounts at varying intervals of the policy tenure. In this, the premium rate is comparatively lower at the inception of the term and increases gradually with time. However, regardless of the premium rate, the plan’s insurance coverage and the benefits remain the same for the whole term.
A variable whole life policy offers life coverage for the whole policy term, ensuring your family members against any financial uncertainty in case of your absence. In addition to this, this plan also helps in meeting your investment objectives by investing your money.
Let us briefly understand the difference between a whole life policy and a term insurance policy.
| Parameters | Whole Life Insurance Policy | Term Insurance Policy |
| Policy Term | The whole life policy offers policy cover till 99/100 years of age i.e., for the policyholder’s whole life | Term plans provide coverage for a limited period i.e., ‘term’ which is usually between 5 to 40 years |
| Coverage | The plan offers a chance to create wealth to fulfill future goals | The plan only offers death benefits on the unfortunate death during the policy term |
| Premium Rates | Since the policy provides cover for a longer term, the premiums are higher than a regular term plan | These plans offer the most affordable premium rates of any life insurance plan |
| Maturity Benefit | These plans provide a maturity benefit in case the policyholder outlives the policy tenure | Term plans don’t offer any maturity benefit unless you have chosen the TROP plans |
| Loan Benefit | You can avail of a loan against the cash value in whole life policy | Since there is no cash value in term insurance, you cannot avail of any loan under these plans |
| Additional Bonuses | In case you have opted for a participating whole life policy, the accrued bonuses will be paid along with the benefit payout | There are no bonuses offered under term insurance plans |
| Who Should Buy? | You can buy a whole life policy if you have financial dependents who may remain dependent for your whole life, like your dependent spouse or child with special needs. | You should buy term plan if you have dependents who might not be financially dependent on you anymore in a few years. For eg: for children |
Let us see the features and benefits of whole life policy that you should know before buying a whole life insurance plan in India.
These plans provide coverage against death for the policyholder’s whole life i.e., till 99 or 100 years of age. This guaranteed life cover (sum assured) is paid to the nominee of the policy during the policy term in case of the policyholder’s death. The payout amount can help your family fund your child’s higher education or future wedding or can be used to secure your spouse's life post-retirement.
In the event of the unfortunate demise of the life assured during the tenure of the policy, the death benefit is paid to the nominee. The death benefit is paid as a total sum assured amount to the beneficiary/nominee of the policy by the insurance company, provided all the premiums are duly paid. This benefit amount will be paid along with the accrued bonuses (if applicable).
The premium rate of a whole life insurance plan is fixed and does not increase or decrease throughout the term period of the policy. So, suppose the policyholder has to pay a premium of Rs. 2,168 per month for a specific policy. In that case, he/she will continue to pay the same premium regularly for the entire premium payment term.
Whole life insurance is designed to provide life protection to the family of the assured during the policy term. It is done in the form of payment of a guaranteed sum assured along with bonuses, if any, in the case of the policyholder’s unfortunate demise.
The policyholder can claim life insurance tax benefits as per the prevailing tax laws under section 80C on the premium paid towards the whole life insurance policy. Moreover, the death claims are also tax exempted under section 10(10D) of ITA 1961.
As whole life insurance provides protection up to 100 years of age, the policyholder can opt for a loan facility against the plan in times of emergency. However, the loan can only be availed if the policy has completed 3 policy years if all the premiums of the policy are duly paid.
The policyholder’s whole life policy will work as a financial backup for the children and the grandchildren after the policyholder's demise. Thus, whole life insurance is a great insurance solution for wealth creation and future planning so that one can provide financial security and a good lifestyle to their family.
Whole life policy offers coverage for a longer term than a regular term plan and secures the nominee in the event of the policyholder’s unfortunate absence. Salaried individuals should plan to provide financial security to their loved ones and family.
Individuals who want to create a financial cushion for their future generations.
Individuals who want to secure their family financially and want to create a corpus in the long run.
Individuals who want to accumulate wealth for retirement should consider buying this life insurance policy.
Individuals who want to save on their yearly taxes.
Listed below are some of the rider options available within the whole life policy:
Within this rider, if the policyholder is diagnosed with a critical illness or is permanently disabled due to an accident, the future whole life policy premiums will be waived off and the policy will remain active until the policy term ends.
Under this rider, the insurer will pay the additional rider sum assured to the nominee in case of the policyholder’s accidental death during the policy term. This payout can help the family take care of their monthly expenses and other financial obligations.
In case of total or permanent disability caused due to an accident, this rider will provide the rider sum assured to the policyholder. This payout can be used to pay any of the medical costs required for the suitable treatment of the disability.
On the diagnosis of a critical illness during the policy term, this rider can help take care of the medical expenses that might incur due to any critical illness that is included in the plan, including life-threatening illnesses like an organ transplant, any severe heart ailment, etc. These diseases could lead to a temporary or even a permanent loss of regular income, and the rider sum assured can help take care of these expenses in a time of financial crisis.
Under this rider, if the policyholder is hospitalized in general or in the ICU ward, a fixed percentage of the basic sum assured is paid to help the policyholder take care of the medical bills and treatment costs.
With this rider, the insurer will payout the entire or a part of the sum assured in case the policyholder is diagnosed with a terminal illness during the policy term. In case the rider pays a part of the sum assured at terminal illness, the remaining part will be paid to the nominee at the policyholder’s unfortunate demise.
Here is a list of factors you should consider while selecting the whole life policy for yourself:
Adequate Life Cover: You should always assess your life cover by taking your family’s requirements into account. Since this amount will be paid to your family in the event of your unfortunate death, the life cover should be enough to cover your family’s financial obligations. You can use a human life value calculator to get an accurate estimate of the life cover amount you are eligible to buy.
Potential Inflation: Since whole life policy provides policy cover for the whole life, you should take the rising costs and inflation into account while selecting a life cover amount for your family. For example, a cover of Rs. 1 Crore might be enough to cover your family’s needs today, but the amount might lose its value in the next 40 years.
Early Investment: The premium rate for whole life policy depends on the age of the policyholder at the time of policy purchase. Since the premium rates are low for young individuals, therefore you should always try buying a whole life policy as early as possible to secure a large life cover for your family at low premiums.
Select Suitable Add-ons: You should always go through the list of available add-on benefits in the whole life insurance plan. You can include these riders in the base plan to enhance its coverage.
Choose the Right Insurer: The Indian regulatory body, IRDAI releases its annual report mentioning the CSR of each insurer for every financial year. CSR is the ratio of the number of claims received to the number of claims settled by a company in a financial year. You should compare the CSR values of insurance companies online and go with an insurer with a high CSR value. This ensures that your family’s claim will be settled in your absence.
Read the Policy Documents: You should always go through the policy documents to understand the details, inclusions, and exclusions of the whole life policy. This avoids any future confusion during claim settlements.
Here are the steps to buy whole life plan from Policybazaar:
Step 1: Visit the official Policybazaar website and go to the Term Insurance section.
Step 2: Provide your name, contact details, gender, and date of birth.
Step 3: Select 99/100 years as your maturity age or click on ‘Switch to whole life’
Step 4: Enter the information about your occupation type, annual income, educational qualifications, and smoking/tobacco consumption habits.
Step 5: Choose the whole life policy from the list as per your needs and pay using your preferred mode to complete the process.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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