Ch. 6: Customization Options in Whole Life Insurance Policy

When you buy ice cream, you always want the flavours of your choice, right? Everybody's favourite part of ice cream is being able to customise it to our exact taste. Similarly, a whole life insurance policy can also be customised according to your preferences. You can develop a customised whole insurance policy by taking your family's financial situation into account.

We'll see what customizations are available when it comes to whole life policies.

Customizations available under whole life insurance:

Limited payment options

In this option, you can decide to pay the premiums in a short time period, while the life insurance policy continues for the individual's lifetime.

By opting for this customization, you can speed up the premium while you are earning, and still get full coverage for your entire life.

Of course, speeding up will mean paying a higher premium in a short period. So yes, the increase in premium due to this customization can be significant.

For instance -

30-year-old Mr Shyam has purchased a Limited Pay Whole insurance policy of Rs 1 crore coverage. By the time Shyam retires at 55, he intends to cover all his premium liabilities. Therefore, he can pay off the premiums for his insurance plan over the next 25 years, depending on what suits him best and be assured that he is financially protected for the rest of his life.

The payment options available under the limited payment scheme can vary depending on the insurance plan and company

Premium Payment Frequency:

There are alternatives available for you to choose the frequency for premium payment. Premiums can be paid annually, semi-annually, quarterly and monthly, depending on your convenience. The Premium shall also vary depending on the chosen frequency option. The monthly payment option is ideal if you can't afford large annual amounts in one go. Then there are businessmen who would rather pay annually than monthly.

For Instance,

Ram, who works in a bank, decides to purchase a whole life insurance policy. He can pay the premium on a monthly or yearly basis. Since he is a salaried person, Ram chooses to go for a monthly plan as he feels the yearly plan might stress him financially due to other liabilities.

Mode of payment for claims/maturity value:

Generally, the sum assured is known to be paid out in a single go as lump-sum.

But your family might not be equipped to manage that amount of wealth appropriately if they suddenly receive a considerable sum of money in the wake of your death. Choosing a monthly payout option can make it easier for the nominee to manage the receipts, ensuring they don't get mishandled.

So insurers now provide various options to customise the claim or maturity payout

Among the following payout options, you can select how your nominee will receive the payout:

• Lump-sum: The entire sum assured is credited to the nominee's bank account. A lump sum payout is an option worth considering when you have significant loans or other financial liabilities to take care of. A single payment ensures that the insured or their nominee receives a substantial sum of money in one transaction so that they can invest or use it for huge expenditures like college fees, debt payments, or down payments on houses.

• Monthly/ Annual Income: With this option, your nominee will receive the sum assured in fixed monthly or annual instalments over a proposed period. This can be used to pay routine expenses like monthly rent, utility bills, or EMI payments made to repay a loan.

Riders:

Riders add extra benefits to your base plan and give you additional coverage in exchange for an extra premium.

The riders available with a whole life insurance policy -

• Critical Illness rider
• Accidental death rider
• Accidental Disability rider
• Hospital care rider
• Surgical care rider
• Waiver of Premium due to disability rider
• Waiver of Premium due to Critical Illness Rider

For Instance, people who have incurred permanent disability or income loss due to an accident are exempted from future premiums if they opt Waiver of Premium due to disability rider. You will be protected against paying any remaining premiums until the end of the policy with this rider.

Riders do have certain conditions to be fulfilled in order to make a claim. Check out the article on riders to understand this better.

A right life insurance policy is essential to build a financial foothold for your future, achieve your long-term goals, and leave a financial legacy for your loved ones. It is imperative that you take the time to tailor the Payment frequency, Payout frequency and riders, etc., and customise your whole life insurance policy to meet your family's needs.