Permanent life insurance is also popularly known as whole life insurance plan. As the name implies, a permanent life plan remains valid throughout the insured’s whole lifetime, provided the premiums are paid on time.
Here’s how these plans work:
- The policyholder pays a specific premium to the insurer depending on the plan, coverage required and other factors. Permanent life insurance policy can be purchased against a payment which can be paid one-time, on a monthly or yearly basis.
- On death of the policyholder, a certain specified amount (the sum assured) is paid to the nominee(s).
- The policyholder can also take loans against these plans.
- Generally, the tenure of whole life plans are up to 100 years with maturity benefits offered up to 80-85 years.
- When the policyholder lives past the age of maturity then the policy will become matured endowment.
- Death benefits are tax free.
- Variants of whole life insurance plans include: unit-linked whole life plan, where a part of the premium is used for life insurance coverage and the remaining amount is invested in an investment fund. Some whole life insurance plans also offer coverage for specific illness and disability.
Understanding the workings of the plan helps you decide if it’s best suited for your needs.