Whole Life Insurance – All You Need to Know

A life insurance policy is a necessity for all. It helps you protect your family’s financial future against uncertainties. And, while many people prefer buying a term plan, you must know that such policies provide coverage only for a specific duration after which the policy lapses. This means you may not have insurance protection after the policy term ends. And, buying a new life insurance policy when you are old may attract higher premiums. You can consider purchasing a whole life insurance policy to avoid such hassles.

What is whole life insurance?

As the name suggests, a whole life insurance policy or a permanent policy provides coverage until the policyholder’s death. It stays in force throughout the insured’s life as long as they pay the premium. The sum assured or the coverage amount is decided when buying the policy, and the insurance company pays the amount to the nominee in the event of the policyholder’s demise.

How does a whole life insurance policy work?

A whole life insurance plan is unique life insurance. The primary objective of whole life insurance is to help the policy buyers get lifelong protection and live a stress-free life and at the same time leave a legacy for their heirs.

The working of whole life insurance is different from a term plan. Unlike term insurance, it pays a death benefit and offers a maturity or survival benefits along with bonuses (if any). There are different types of whole life insurance policies. You can either buy a traditional whole life policy or a unit-linked plan. The latter can help you get exposure to investment in the financial market and get market-linked returns.

Features and benefits of whole life insurance policy

Fixed premium

One of the significant features of a whole life insurance policy is that the premium is set while buying the plan, and it remains fixed throughout the policy tenure. So, if you buy a policy at a young age, you can get the cover at a lower premium and continue paying the same amount forever.

Lifetime protection

Perhaps the unique feature of a whole life insurance plan; it is specifically designed to help you get protection for life. This means you can be assured that your family’s financial future is secured. The whole life insurance policy pays the death benefit, i.e., the sum assured and the accrued bonus upon the policyholder’s death or policy expiry.

Tax benefits

The premium you pay for the whole life insurance is eligible for tax deduction up to a maximum limit of ₹1.5 lakhs in a financial year under Section 80C of the Indian Income Tax Act, 1961.

Additionally, when the insurance company pays the death benefit, the amount is fully tax-free in the nominee’s hands under Section 10(10D) of the IT Act.

Loan against the policy

If you face any financial emergency, you can use the whole life insurance policy to your advantage and avail a loan against the sum assured. However, you would be eligible to get the loan only after three years from the date of buying the policy.

Final Word

Whole life insurance is an ideal choice of insurance for all, and it is advantageous if you are the only earning member in the family and want to leave a legacy for your children.