What is Whole Life Insurance?

You might have a vague idea about how an insurance policy works. What if we told you that there is a way in which you can ensure financial security for your family by leaving behind a legacy? The answer is whole life insurance.

A whole life insurance policy, also known as a permanent life insurance policy, covers you for your whole life - until you are 99 or 100 years old. Your loved ones receive the cover amount if you pass away during the policy duration. And, if you survive, you receive the cover amount in the form of a maturity benefit.

So, a whole life insurance policy creates a tax-exempt³ financial cushion for your loved ones, it is like a parting gift, a warm-hearted inheritance for them. This will help them maintain their lifestyle without having to make compromises and is especially useful if you have members who will be dependent on you for a long time, like your spouse, a child with special needs, etc.

Let’s have a look at how a whole life insurance policy works.

Whole life insurance plans provide you with the following benefits -

1. Death Benefit to your nominee
If you, unfortunately, pass away during the policy duration, the cover amount is paid to your nominee in the form of a Death Benefit.

2. Maturity and Survival Benefits to the policyholder
👉 Maturity Benefit
You receive the cover amount once the policy duration gets over - in the form of a maturity benefit. The policy maturity age is usually 99-100 years.
A unique aspect of whole life insurance policies is their maturity age, which goes up to 99-100 years. This may differ across insurance companies and products.

👉 Survival Benefit
Some insurers may pay you survival benefits when the premium payment term gets over. This may differ from insurer to insurer and may be -

• A percentage of the cover amount
• An amount determined by the insurer
• The bonuses accrued under your policy

To be covered effectively by a whole life insurance policy, you must pay the premiums on time.

• If the premiums are paid without any lapses and you pass away during the policy tenure, your nominee will receive the cover amount as a Death Benefit.

• If the premiums are paid without any lapses and you survive the policy tenure, you receive the maturity benefit. The way the maturity benefit is disbursed may vary. It may be paid as -
💰 One lump sum in a single go, or
💰 A combo of a lump sum and multiple instalments of money over a predefined period of time

• Some insurers may also give you survival benefits if you survive the premium payment term. They may be paid in one shot or over a period of time in instalments.

Raphael is a 35-year-old married male who wants to secure the future of his young children (education and weddings) and also create a financial cushion for his family, so they’re well-protected in his absence. He invests in a Whole Life Insurance Policy with a cover amount of Rs 1 crore. He will be required to pay the premiums for 30 years but will be covered for his entire life, i.e., up to the age of 99-100 years.

He will also be eligible to receive a survival benefit once the premium payment term is over. The survival benefit will be equal to 5% of his cover amount and will be paid as a lump sum.

So, the benefits that ensue under his policy are -
💰 Death Benefit
If Raphael passes away during the policy duration, his nominee shall receive a guaranteed⁴ sum of Rs 1 crore.

💰 Maturity Benefit
If he survives the policy duration, he will be eligible to receive a guaranteed⁴ sum of Rs 1 crore.

💰 Survival Benefit
When his policy completes 30 years (that is, the end of the premium payment term), he shall receive the survival benefit. Survival Benefit = 5% of cover amount = 5% of 1 crore = Rs 5,00,000.

Whole life insurance policies cover you over a lifetime. They can be very handy when you want to provide a financially stable future to your loved ones with guaranteed⁴, tax-exempt³ returns.