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What is Whole Life Insurance & How Does it Work?

By Finserv MARKETS - Aug 14,2019
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Whole Life Insurance Policy

The whole life insurance plan is a cover that protects you for life if you keep paying the premium amounts on time. Also, you get maturity benefit at the end of the term (if you survive throughout the policy tenure). In case of your demise, your beneficiary will receive the death benefit.

You can extend the coverage of whole life insurance policy for as long as you live, keep paying the premiums and the plan is not surrendered.

Such a plan is designed for people who do not want to invest in fixed tenure but want insurance coverage and benefits until their death. Also, since the policy builds up cash value, the premium rates are generally high.

How Does The Whole Life Insurance Policy Work?

Know for a fact that the tenure for the whole life insurance policy can be extended up to the age of 100 years. Overall, the plan functions straightforwardly. If you keep making premium payouts regularly, the policy will be active.

A part of the premium amount is set aside for financial coverage. Hence, if you (the policyholder) happen to die, the beneficiary receives the death benefit. On the other hand, if you survive the policy tenure (up to the age of 100 years), then you will receive the maturity benefit.

Whole Life Insurance – Types

There are several whole life insurance plans available in the Indian market. Some of the significant types are explained below –

1.Ordinary Whole Life Insurance

It is a basic whole life insurance policy and is nothing but an agreement between you and the insurance provider. To keep the policy active, you will have to keep paying the premiums on time, and your insurance provider will keep providing you necessary coverage.

Upon your death, the nominee receives the whole amount known as the death benefit. If you survive the specified tenure, then you will receive the maturity benefit. It is, however, noteworthy that the premium rates for this policy are relatively high.

2.Limited Payment Whole Life Insurance

In this plan, you will have to pay premiums for a limited period only. For instance, you will be needed to pay premiums for 20 years and provided life insurance for 25 to 100 years.

The major advantage of this unit linked insurance plan is that you can pay the premium amounts during your work life. Once the specified period is over, you do not have to worry about paying premiums as you still will be covered under the policy.

The limited payment whole life insurance is beneficial for people with limited financial capabilities towards the later part of their lives. However, since the premium paid is for a shorter time, the premium rates are quite high.

3.Modified Premium Whole Life Insurance

Here, you will pay low premiums initially. But after a while, you will have to pay high premiums to keep your policy active. This plan accumulates money that can be accessed by you and is also tax-free.

Modified premium whole life insurance is especially for those who are planning to seek coverage early in life and do not have the financial capability to pay high premiums right away. However, note that you have to pay high premiums after a few years.

4.Survivorship Life Insurance

This type of policy insures two people at a time. After the death of the second insured individual, the policy compensates the mentioned nominees. It is noteworthy that this policy will provide benefits only after both the insured lives have passed on. The premium rates are cheap compared to two separate life insurance policies.

Whole Life Insurance – Benefits

Following are the benefits of whole life insurance policy.

  • Lifetime Protection

The coverage of this policy ends after your death. However, if you are diagnosed with any illness or health issues, the policy is terminated.

  • Stable Premiums Rates

You have to pay regular premiums throughout the policy tenure.

  • Cash Value

As this policy accumulates cash over time, the cash value can be utilized to reduce the policy premiums later in the future. Also, the amount can be withdrawn, or you can avail a loan against it.

  • Flexible 

You have the flexibility to use the cash value to retain it or grow the value of your policy further.

  • Tax Benefits 

You get to avail tax exemptions on the premiums paid under Section 80C. Also, the death benefit is tax-free under Section 10(10D).

The Bottom Line

A whole life insurance policy is highly beneficial for people looking for life-long coverage and benefits. If you want to purchase whole life insurance, visit our platform today. With ULIP plans like Bajaj Allianz Whole Life Insurance, you can get extensive coverage, bespoke insurance plans, easy claim process, and much more.

Also read in detail about the high ULIP returns you can enjoy with a Bajaj Allianz ULIP plan available on Finserv MARKETS.

Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!


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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522