Whole life Insurance

An all-in-one way to protect and build your money

Whole life Insurance

Whole life insurance provides coverage for the life of the insured. In addition to providing a death benefit, whole life also contains a savings component where cash value may accumulate. These policies are also known as permanent or traditional life insurance. 

How does it work?

A whole life plan can be purchased against a payment which can be made as a one-off sum, on a monthly or a yearly basis.If you have purchased a unit-linked whole life policy, then your funds will be directed not only towards the purchase of your life insurance for payment of the sum assured amount and the remainder of the amount will be invested in an investment fund. In case of unit-linked/flexible whole life policies , the insurer will regularly review the policy to compare whether the value of the policy is equivalent with the cost of the life assurance which it is providing.

Key Takeways

  • Whole life insurance lasts for a policyholder’s lifetime, as opposed to term life insurance, which is for a specific amount of years.
  • Whole life insurance is paid out to a beneficiary or beneficiaries upon the policyholder’s death, provided that the premium payments were maintained.
  • Whole life insurance provides a death benefit but also a savings component, where cash can build up.
  • The savings component can be invested; additionally, the policyholder can access the cash while alive, by either withdrawing or borrowing against it, when needed.

Benefits Of Whole Life Policy


Your Dependents Will Benefit From

This plan the return will prove to be an additional financial source in the family. This plan is ideal for estate planning individuals who want to pass on their estate to their legal heir as it helps create wealth.


Loan Option Available

On Your Whole Life Plan Policy the surrender value of the policy increases over time and you can borrow against the policy’s surrender value at any time. This is a better alternative against borrowing against home or retirement accounts.


Assurance Of Coverage, Periodic Payments And Tax Benefits

The survival benefits will be built over time which keeps increasing over time. You will get lifetime coverage along with guaranteed level premiums for a limited premium payment term. The premium is constant throughout the premium payment term. Sum assured is guaranteed and the bonuses are declared based on the performance. Some companies offer survival benefit from the end of the premium payment term till the policy matures. Tax benefits are also available to the insured under Section 80C and Section 10(10D) of the Income Tax Act, 1961.


Cover For Life

The insured will get cover for his entire life unlike other life insurance plans that is fixed for a certain period. The other life insurance plans will expire and it will be expensive to take another one when you really want one. In the event you die, a lump sum tax free amount is paid to the nominee. If you outlive the term, you will not receive any return. For example if a 25 year old takes a whole life plan at the age of 25 years, he will receive a lump sum payment at the age of 45, the age at which his 20 year premium payment term will expire. He can use this money for his retirement and also his cover will continue till he turns 100 or till the date he dies.


Serves As A Source Of Cash

Financial experts believe that a person must keep 6-8 month’s living expenses in the form of liquid asset. It is however difficult to reserve such a huge cash while meeting retirement and long term saving goals. But with a whole life plan, you can get the cash at the end of the premium payment term.

Frequently Asked Questions

How does a universal life insurance policy work?
With universal life insurance, the insured pays the premium of their life insurance as well as some additional money to “overfund the policy” and build a cash value. This cash value gains interest overtime and may be borrowed from or used to subsidize the cost of the life insurance policy in the future
Why do I need a term plan?
Assume, you earn an annual income of ₹ 7 Lakh. For your family’s financial well-being, this income should continue even when you are not around. There are a few ways that you can make this happen.
  • A bank a/c saving of ₹ 1 Crore as FD, which will at 7% generate a yearly income of ₹ 7 Lakh for your family.
  • A sizeable investment which might grow to a corpus of ₹ 1 Crore, before your death.
  • If you can’t manage to create a large saving/ investment, then a viable option is a term plan of ₹ 1 Crore. It will pay this amount to your family on your demise. Premiums for a ₹ 1 Crore life cover start at ₹ 490 per month2 only, which is less than half the cost you would pay for dinner with family at a restaurant.
When should I buy a term plan?
The earlier you buy a term plan, the better (and cheaper) it is. With time, the premiums become more expensive. For example, premiums for a 30-year-old, non-smoker male would amount to for a 30-year policy duration. The premium increases to ₹ 1428 p.m. if the policy is bought at age 40. Keep in mind the premiums get fixed at the age you purchase, for the entire policy duration.
Also, with current lifestyles and increasing instances of diseases and illnesses, it may become difficult to get a term plan later, as you grow older.
How to Choose the Best Term Plan?

While selecting a term plan, you need to look for the following and ensure that your family has the best financial protection with the term plan:

Claim settlement record of a life insurance company indicates the ultimate moment of truth for the customer. Claim settlement record can be assessed through a percent number (Claim Settlement Ratio) released by IRDAI (Insurance Regulatory and Development Authority India) every year.

How much life cover do I need?
The life cover you need depends on your current annual income. We recommend that a life cover equivalent to 10-15 times your annual income is sufficient to provide for a safe future for your family.
If budget is a problem, you could go for monthly premium payment option over a yearly commitment. However, it is important to have a sufficient life cover so that your family’s financial security is not compromised.
What is Critical illness benefit ?

If you are ever diagnosed with a critical illness, it can affect you physically, emotionally and financially. The optional benefit of covering 34 Critical Illnesses such as cancer, heart attack and kidney failure for a maximum of 30 years without any change in premium. But here’s the best part – It gives full claim payout on the first diagnosis of any of the covered 34 Critical Illnesses. No Hospital Bills required. This amount can also safeguard your family against the loss of income arising out of the illness.

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