Whole Life Insurance
A whole life insurance policy can help you protect your family in case of an unfortunate event, while also growing your funds. With a death benefit, as well as maturity and life benefits, the plan is a comprehensive solution for safeguarding your finances.
Types of whole life insurance policies
There are six main types of whole life insurance policies:
Non-Participating Whole Life Insurance:
This is the most basic type of whole life insurance policy, with low-cost premiums, and a sum assured feature. It is important to understand that while this policy does offer death benefits, it does not offer a dividend since there is no investment component.
Participating Whole Life Insurance:
This type of whole life insurance policy is the polar opposite of a non-participating whole life insurance policy. In this policy, a part of the premium is invested by the company, and the profits earned are distributed to policyholders in the form of bonuses. The payment mode can vary from policy to policy - in some cases, the bonus is paid as a lump sum, while in others, it can offset the premiums that the policyholder is yet to pay.
Level Premium Whole Life Insurance:
This type of policy requires policyholders to pay the premium for the duration of their lives. There is a set premium amount that does not change.
Limited Payment Whole Life Insurance:
As the name indicates, in this type of policy, the premiums are paid for a limited period, as determined in the policy details. The policyholder will still be insured for the duration of his or her life. However, it is important to note that this policy comes with a higher premium since the premium period is lower than level premium policies.
Single Premium:
In this policy, the policyholder pays a single premium that is then invested by the company. This invested amount is then paid to the policyholder’s family in the event of a demise.
Indeterminate Premium:
In this whole life policy, there is a maximum guaranteed¹ amount along with a lower premium. The lower premium is applicable for a set period of time, after which the insurance provider increases the amount.
Benefits of whole life insurance
A whole life insurance policy offers the following benefits:
Large coverage period:
A whole life insurance policy offers cover until the policyholder reaches 100 years of age.
Financial security:
In the event of the demise of the policyholder, the family can still have financial security in the form of the sum assured and bonuses.
Maturity benefits:
At the time of maturity, policyholders can either enjoy regular dividends or receive a lump sum payout, based on the type of policy chosen.
Tax benefits:
Under Section 80C of the Income Tax Act, the policyholder can enjoy tax benefits² on the premiums paid. Additionally, there are tax benefits² applicable on the maturity amount as well, under Section 10(10D).
Loan facilities:
Policyholders can take loans against the policy, should they require funds to fulfill life goals.
Partial/full withdrawals:
In the event of an emergency, policyholders can make partial or full withdrawals and use the cash as they see fit.
Riders for whole life insurance
As is the case with many types of life insurance policies, whole life insurance can also be enhanced with the help of riders3. Riders are basically add-ons that provide additional coverage to the policyholder in exchange for added premium amounts. The riders3 applicable for whole life insurance include:
Accidental death benefits
In the event of an accidental death, the nominee will receive an additional lump sum along with the base sum assured.
Critical illness rider
This rider³ offers cover for medical expenses that may arise due to a critical illness. The diseases that fall under the bracket of critical illness are defined in policy documents and may vary from policy to policy. A few examples are cardiovascular disease, cancer, respiratory diseases, and so on.
Income benefit rider
This rider³ ensures that the benefits received via investments are paid throughout the life of the policyholder.
Partial/Permanent disability rider
A disability can hamper the policyholder’s ability to earn. This rider³ provides a fixed income in case of a disability due to an accident or illness.
Premium waiver rider
In the event of the demise of the policyholder, this rider³ ensures that the family does not have to continue to pay premiums for the policy’s validity. They will still receive the benefits of the policy.
Exclusions under whole life insurance
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Suicide
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Involvement in illegal activities
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Alcohol or drug use
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Terrorism
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Lifestyle causes
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Life-threatening sports, like cliff jumping
Documents needed to purchase a whole life insurance policy
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Identity proof (such as passport, Aadhar Card, Driver’s License)
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PAN Card
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Two passport size photographs
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Address proof (such as passport, Aadhar Card, Driver’s License)
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Age proof (such as class 10th marksheet, class 12th marksheet, passport, Aadhar Card)
Frequently Asked Questions on Whole Life Insurance
Certain whole life insurance policies offer a Guaranteed1 Surrender Value that is paid to the policyholder if they surrender the policy. However, most policies require a premium payment of at least 2 years for this to come into effect.
As whole life insurance policies have a certain monetary value in the market, policyholders who require funds for life goals can get a loan against the policy. The loan amount can vary from bank to bank, as well as the overall value of the policy.
No, it is not compulsory to purchase riders3 for a whole life insurance plan. However, it is always beneficial to have additional cover.
The following riders³ are applicable for whole life insurance plans:
- Accidental death benefit
- Premium payment waiver
- Permanent/partial disability benefits
- Income benefits
- Critical Illness Cover
A term insurance provides cover for a specific time period, known as the policy term. A whole life insurance policy provides cover for the entirety of the policyholder’s life.
Yes, many insurance providers allow policyholders to turn their term plans into a whole life plan. You must speak to your policy provider to know more.
There are a few policies that have a minimum age criteria of 30 days. Such whole life insurance policies can be purchased for your child.
You should buy a whole life insurance policy if:
- You are the sole breadwinner in your family and have many dependents
- You want to ensure financial security in your future in the form of dividends or a lump sum amount
- You want to secure your retirement period and live independently
- You want to save on taxes
- You can pay higher premiums.
- The minimum entry age can be as low as 30 days old (this can depend on the policy under evaluation)
- The maximum entry age is 60 years old, with a premium payment period of 10 years.
- The policy can be purchased by Citizens of India.
The following taxability rules apply:
- Policyholders can enjoy tax benefits2 on premiums under Section 80C of the Income Tax Act.
- Further tax benefits² are applicable on the maturity amount as well, under Section 10(10D).
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Disclaimer
¹ Provided all due premiums are paid.
² Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
³ There are exclusions attached to the rider. Please refer to the brochure.
ADV/7/22-23/807
