The primary objective of life insurance is to provide financial security to the family especially in managing daily expenses and other financial requirements in the event of the family breadwinner’s demise. There are different types of life insurance plans available in the market and you can pick one as per your need and financial planning. Whole life insurance is one of the life insurance options that offer coverage for the entire life.
A whole life insurance policy is sometimes also referred to as permanent life insurance. This policy stays in force throughout life as long as the life assured pays the premium. Under whole life insurance, the sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim – when the life assured dies. The maturity age is normally set at 100 years. If the life assured dies before the age of 100 years, the nominee receives the sum assured. However, if the life assured outlives the age of 100 years, the insurance company pays the matured endowment coverage to the life insured.
Types of Whole Life Insurance Plans
Whole life insurance plans come in various formats. After a detailed evaluation of the features and benefits of the policy, one can select the type as per his or her needs and affordability.
Participating Whole Life Insurance: Under this plan, the policyholder gets bonus and dividends from the insurance company.
Non-Participating Whole Life Insurance: This is a low-cost insurance plan which demands low and levelled premium throughout the policy tenure. No dividend or bonus is shared with the policyholder.
Limited Payment Whole Life Insurance: As part of this plan, the premium is paid for a limited period of time while the coverage is provided for the entire plan period (till the policyholder is alive or 100 years). Since the premium payment time is limited, the amount of premium is higher compared to that for level premium whole life insurance.
Level Premium Whole Life Insurance: This plan requires premium to be paid till the very end of the policy, with the premium remaining the same throughout the tenure.
Single-Premium Whole Life Insurance: Under this plan, the premium is paid only once and the plan is funded for life. It is an expensive plan in terms of premium paid.
Indeterminate Premium Whole Life Insurance: This plan allows policyholders the option of adjusting their premiums. Based on the estimated current earnings, cost of expense and mortality, the insurer will charge policyholders a "current" premium. In case there are any changes in the aforementioned estimates, the insurer adjusts the premium amount accordingly which the policyholder will then be charged.
Additional Reading: What Are the Different Types of Life Insurance Policies?
Why Whole Life Insurance Plan?
Whole life insurance is a suitable form of protection for a number of individuals. It is ideal for an investor if:
He has made investments towards post-retirement requirements and is seeking other opportunities to invest in.
An investor who owns an estate and wishes to plan and bequeath the estate and savings to the beneficiaries and transfer wealth.
A young professional who has started off with his or her career and will be able to make premium payments for a considerable time going into the future.
Benefits of Whole Life Plans
Life Cover: As part of whole life plans, the insured gets cover for his entire life, unlike other life insurance plans that are fixed for a certain period. The other life insurance plans tend to expire and it could be expensive another 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 person who is 25 years 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.
Assurance of Coverage, Periodic Payments and Tax Benefits: Under whole life plans, the survival benefits are built over time and these keep 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. The sum assured is guaranteed and the bonuses are declared based on the performance. Some companies offer survival benefits from the end of the premium payment term until the policy matures. Tax benefits are also available to the insured under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
Source of Cash: It is always advisable for an individual to keep 6-8 months’ worth of living expenses in the form of liquid assets. It could be challenging to reserve large amounts of cash while meeting retirement and long-term saving goals. However, with a whole life plan, you can get the cash at the end of the premium payment term, thus allowing you easy access to cash when needed.
Loan Option: The surrender value of a whole life policy increases over time and you can borrow against the policy’s surrender value at any time. This is a better option as compared to borrowing against home or retirement accounts.
Benefit to Dependents: The return will prove to be an additional financial source in the family. This plan is ideal for investors planning to pass on their wealth to their legal heir as it helps create additional wealth.
Eligibility for Whole Life Plans
|Entry Age||30 days-60 years|
|Maturity Age||100 years|
|Minimum Sum Assured||Rs. 50,000|
|Minimum Premium||Rs. 500 (Monthly)|
Documents Required for Whole Life Plans
Mentioned below are some of the common documents that are required to be furnished while enrolling in a whole life plan.
Income proof - Salary slips, income tax returns, bank statement, etc.
Address proof - Driving License, Aadhaar card, voter's id, passport, etc.
ID proof - PAN card, Aadhaar card, voter's id, etc.
Age proof - Aadhaar card, voter's id, passport, driving license, etc.
Top Whole Life Insurance Plans in India
1. Max Life Whole Life Super - Max Life Whole Life Super plan is a participating whole life insurance policy that allows guaranteed protection up to 100 years of age combined with bonus additions that contribute to the growth of the investment. This is a limited premium paying plan which gives the option of including extra riders and raising the risk cover.
Here are the top features of this plan:
- Maturity Benefit: Upon completion of the policy term, the investor will get a guaranteed payout along with applicable bonuses as the Maturity Benefit.
- Death Benefit: In case of the investor’s death during the policy term, the nominee will receive a guaranteed payout along with applicable bonuses as the Death Benefit and the policy will terminate.
- Bonus Payout Options: An investor has the option to receive the annual cash bonus announced by Max Life Insurance in three different ways depending on specific needs.
- Terminal Illness Benefit: In case of any terminal illness, 50% of the Guaranteed Maturity Sum Assured is paid immediately upon policyholder’s request.
- Tax Benefit: An investor may be entitled to certain applicable tax benefits on the premiums paid and policy benefits.
2. SBI Life Shubh Nivesh - This non-linked profit endowment assurance policy has full life coverage option. This is a savings income - insurance cover plan put together, to allow you to save regularly for the future and to also receive maturity benefits as lump sum/regular payments.
Here are the top features of this plan:
- Life cover for up to 30 years or whole life depending on one’s insurance needs
- Simple reversionary bonuses throughout the policy term
- Two plan options – endowment option and endowment with a whole life option
- Option to receive the basic sum assured as a lump sum or as regular income, at maturity
- Comprehensive coverage at an affordable cost with three rider options
3. HDFC Life Sampoorn Samridhi Plus - Whole Life Insurance – This plan gives an option to choose between an endowment- Lump sum amount payable at the end of policy term, and endowment with whole life -Lump sum amount payable at the end of policy term plus sum assured that is payable upon survival until 100 years of age/death.
Here are the top features of this plan:
- This is a limited premium endowment plan with an option to extend life coverage up to 100 years under whole life coverage
- The plan involves limited premium payment term equal to policy term less 5 years
- An investor has the flexibility to choose a policy term from 15 to 40 years
- Guaranteed Additions up to 5% p.a. of “Sum Assured on Maturity” for first 5 years
- The plan participates in the profit of the participating fund by way of bonuses from the 1st year
- The plan offers an additional sum assured in case of accidental death during the policy term
- Investors have the flexibility to choose the premium payment frequency i.e. monthly/quarterly/half-yearly/annual
- Tax Benefit under Section 80C and Section 10(10D) of Income Tax Act, 1961
- Investors can get additional protection by opting for HDFC Life Critical Illness Plus Rider that provides Rider Sum Assured in case diagnosed with any of the 19 Critical Illnesses
4. IDBI Federal Lifesurance – This plan allows an investor to live life to the fullest and live the dreams with a couple of massive pay-outs. The first of these payouts happen at the end of the premium payment term and second when the investor’s age is a hundred years of age. Besides, this policy allows an investor to leave behind a legacy for his family as well as financial security in case of his absence.
Here are the top features of this plan:
- Allows investors to safeguard their savings with guaranteed additions
- Added Bonus to boost the savings
- Investors can get double protection with Accidental Death Benefit
- The plan offers a discount on premium
- Investors also get tax benefits on premiums paid
- Maturity benefit: On maturity of the policy, an investor receives maturity sum insured plus vested guaranteed additions plus vested reversionary bonuses, if any, plus terminal bonus, if any.
- Death Benefits: On the death of the life insured during the policy term, the payout includes death sum insured plus vested guaranteed benefits plus accrued till date of death plus vested reversionary bonuses accrued till date of death plus interim bonus, if any plus terminal bonus, if any.
Why should I buy a whole life insurance plan?
A whole life insurance plan covers the life assured until he dies or for his whole life or till age 100. Plus, it gives an opportunity to leave a legacy for the investor’s heirs.
Should I buy whole life insurance for my child?
No. It may not make sense to buy this plan for your child. The main purpose is to provide the death risk coverage to the breadwinner, as the untimely death of the breadwinner could put the family in a financial crunch.
Is Whole Life Insurance suitable for senior citizens?
No. But, if purchased at an early stage of life, helps in retirement planning.
Can I surrender my whole life policy in exchange for its cash value?
Yes. However, when you surrender your policy in return for the cash value, you make the life insurance segment invalid. Meaning that your beneficiary will not get the death benefit.
Can a term insurance plan be converted into a whole life insurance policy?
Yes. You can convert a term policy to a permanent policy as long as the conditions of the policy have been understood and the premium payments have been timely. It also depends on whether the term insurance plan that you hold provides you with the option of converting it into a whole life plan.
Additional Reading: How Much Life Insurance Do You Really Need?
A whole life plan is a unique life insurance plan. The main objective of whole life insurance is to help the life assured to live a worry-free life while being able to create a legacy for their heirs. Whole life insurance is a suitable form of protection for a number of individuals. Every earning individual must plan to provide financial protection to their family.