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 What is a Whole Life Insurance Plan?

Whole life insurance, also known as permanent life insurance, offers you coverage up to the age of 100 years. Such a risk cover safeguards your dependents from any unfortunate mishap for your entire lifetime. The insurance plan stays in force for the entire policy period in exchange for timely premium payments.

A whole life insurance policy provides the dual advantage of life cover and a maturity benefit. Thus, you can ensure your loved ones are taken care of in your absence while securing a savings fund to fulfil future life goals. We have explored what a whole life policy is, let’s now understand ‘How does a whole life insurance policy work?’.

How Does Whole Life Insurance Work?

With whole life insurance, you can financially protect your family in the event of an untoward incident. Here, the insurance plan provides a risk cover to the insured up to the age of 100 years. If something were to happen to the policyholder before turning 100 years of age, the insurer would pay out a lump sum death benefit to the beneficiary.

Furthermore, you can also avail a maturity and a survival benefit along with some bonuses. Here, if the policyholder survives up to the age of 100 years, the insurance provider would pay out the matured whole life insurance benefit to the policyholder. Such a dual benefit enables you to create wealth for your loved ones to meet long-term goals.

So, you can select a suitable whole life insurance policy that satisfies your insurance requirements and financially protects your dependents. Moreover, there are two kinds of whole life policies, traditional whole life plan and Unit-Linked Insurance Plan (ULIP) that help you customise your policy further.

Benefits & Features of Whole Life Insurance

Here are some features and key perks of opting for a whole life insurance policy:

  • Lifetime Protection

The whole life insurance policy provides you lifelong coverage against the unforeseen risk of death. Therefore, you can be worry-free when it comes to your loved ones as you have lifetime protection.

  • Constant Premium Amount

Your insurance premium for a whole life plan shall remain constant throughout the policy tenor. So, the insurance cost will not vary and you can enjoy affordable rates to secure a life cover.

  • Financial Backup

By opting for a whole life insurance plan, you can ensure your dependents have sufficient financial backup in your absence. Your loved ones will be financially independent and won’t experience a cash crunch.

  • Regular Payments

You shall get the maturity amount along with the bonus as a lump sum payout when your whole life insurance policy matures. However, you can also choose to get the maturity benefit as a regular income where the entire sum will be paid out on a periodic basis. Depending on your insurance needs, you can pick the lump sum or a regular payout mode.

  • Loan Against Policy

As the permanent life insurance plan has a cash value, you can easily opt for a loan against the policy in case of emergencies. Furthermore, a loan against the whole life insurance is a lucrative option when compared to other loan alternatives. However, you can enjoy this loan facility on completion of a certain number of policy years and by paying your premiums on time.

  • Tax Benefits

Apart from the advantages offered by the whole life insurance policy, you can also save on taxes and reduce your tax liability. The premiums paid towards securing an insurance plan can be claimed under Section 80C of the Income Tax Act, 1961. You can claim a maximum amount of ₹1.5 lakh per financial year. Moreover, the maturity or the death benefit can be claimed under Section 10(10D) of the Income Tax Act, 1961.

Types of Whole Life Insurance Plans

Broadly, there are two types of whole life insurance policies, participating and non-participating plans. These are further categorised into four kinds of whole life policies. So, check out various whole life insurance plans that you can purchase to secure your future:

1. Participating Whole Life Insurance

In a participating whole life insurance policy, the premiums are invested by the insurance provider and the net returns could be distributed amongst the policyholders. Thus, such a type of insurance plan attracts bonuses that can be paid out in several ways. However, there is no fixed percentage of returns or any assurance regarding the bonus being declared every policy year.

2. Non-Participating Whole Life Insurance

In non-participating whole life insurance, there are no bonuses offered to the policyholders. For such plans, the premium amount and the death benefit, known as the face value, remain constant.

Now that you know the two major types of plans, let’s understand the four kinds of whole life insurance in detail:

  • Level Premium Whole Life Insurance

The insurance premium for such a plan remains constant throughout the policy period and doesn’t change with each passing year.

  • Single Premium Plan

The policyholder pays a single lump sum premium amount at one go, unlike other policies. Thus, the beneficiary can avail a substantial death payout as the premium amount is more.

  • Limited Payment Whole Life Insurance

For this type of insurance policy, the premium needs to be paid for a limited period of the tenor and not for the entire policy period. However, the insured is covered for the whole term against any unforeseen mishaps. Due to the limited payment feature, the premiums are relatively higher when compared to the traditional whole life policy.

  • Indeterminate Premium

Here, the insurance provider charges two premium rates to the policyholder, a higher rate and a lower rate. With a higher premium rate, the insurer invests the amount to earn returns to lower future premium prices.

Difference Between Whole Life Insurance Vs Term Insurance

With the help of a comparative view, let us learn the difference between whole life insurance and term insurance:

Factors

Whole Life Insurance

Term Insurance

Coverage

Whole life policy offers a life cover along with a savings component for wealth creation

Term insurance is a pure risk cover that safeguards your dependents in your absence

Policy Term

Such a plan provides a long policy tenor and secures the insured up to the age of 100 years

Such a policy offers a fixed tenor of 5 to 30 years to suit the policyholder's insurance needs

Premium Amount

The premium amount can be higher when compared to term insurance plans

The premium amount is much more affordable when compared to any life insurance policy

Maturity Benefit

Whole life insurance policy offers a maturity benefit if the insured outlives the policy period

Term insurance has no maturity benefit but you can opt for a survival benefit with Return of Premium Term Plan (TROP)

Loan Against Policy

You can avail a loan facility with whole life policy

As term insurance has no cash value, you cannot avail a loan facility

Bonus

In the case of participating whole life insurance, you can get bonuses from your policy

Term insurance has no such feature

 

 Some Important Whole Life Plan Riders

You can make the most out of your whole life insurance policy by clubbing it with different rider benefits. These whole life policy riders are optional and you can choose the ones that you require. Here is a look at some of the whole life insurance plan riders:

  • Accidental Death Benefit:

    By opting for this accidental death benefit, the nominee will get added advantage in case the policyholder passes away untimely. The nominee gets an accidental death sum assured that will be extra, in addition to the assured sum of the plan.

  • Premium Waiver:

    In this premium waiver rider of a whole life insurance policy, if the policyholder passes away or has a disability, the future premiums of the whole life insurance plan premiums will be waived off and the policy will still remain active until the end of the term.

  • Critical Illness:

    Having this rider will give you financial security for medical expenses that might incur because of any critical illness like an organ transplant, severe heart ailment, among others.

  • Partial/Permanent Disability:

    In case of any partial or permanent disability caused to you by any unfortunate accident or sickness, this whole life insurance plan rider will give you income for a certain period of time. The actual payout may vary depending on the disability that occurred.

  • Income Benefit:

    In a whole life insurance policy, the benefits are usually provided as a lump sum amount. If you opt for the income benefit rider, you will get the benefits of guaranteed income in instalments.

Who Should Opt for Whole Life Insurance?

Whole life insurance policies are suitable for all kinds of people, however, the following types of individuals should definitely consider buying the plan:

  • Individuals who want to leave behind a legacy for their loved ones

  • Policyholders who want to secure a life cover while investing in a tax-saving instrument

  • Individuals who have dependents and need to financially safeguard them for a longer policy tenor

  • People who aim to protect their family during retirement

  • Policyholders who want to earn returns from their whole life insurance policy

Over to you!

Life insurance is the need of the hour due to the uncertainty in life. So, you can make sure your family has financial cushioning in your absence and more than enough to make ends meet. To assure your loved ones are safeguarded during tough times, you can pick the right type of life insurance policy for you!

Browse through the various insurance policies available at Bajaj Markets such as term insurance and Unit-Linked Insurance Plan for a secure future! With lucrative riders, hassle-free claims, safe online purchase mode and more, we have you covered!

Term Insurance Covers and Requirements

Read More About Term Insurance

Government Life Insurance Schemes

FAQs on Whole Life Insurance

✔️Can I combine my whole life insurance policy with riders?

Yes. You can easily purchase insurance riders to enhance your whole life policy and gain maximum security.

✔️Why is the premium cost for whole life insurance higher vs term insurance plans?

As whole life insurance offers you a maturity benefit along with a life cover, the premium cost is higher. Whereas, term insurance is a pure risk cover and only provides a death benefit. Estimate the premium rate with our term insurance premium calculator now! 

✔️What is a better insurance policy between whole life insurance and term insurance?

Both the insurance plans have their individual perks and features. However, picking the right life insurance policy completely depends on your insurance requirements. So, it is advised to understand your needs first to buy the best plan. Read more about the various types of term insurance on our platform!

✔️Can I cancel my whole life insurance plan?

Yes, you can cancel your whole life insurance policy and get the surrender value for your plan.

✔️What is the disadvantage of buying whole life insurance?

One of the cons of opting for whole life insurance can be the high premium rates when compared to other life insurance plans. However, the premiums of whole life insurance shouldn’t be considered if the policy satisfies your insurance needs.