A whole life insurance policy is a financial tool that helps protect the future of your family as well as encourages you to live a long and healthy life.
Whole life insurance also posits the perfect opportunity to secure your entire lifetime under a single policy with a low premium.
What is Whole life insurance?
Whole life insurance, as the name suggests, is a policy that insures your entire lifespan. The tenure of a whole life insurance plan is 99-100 years, and if you survive it, you are entitled to the maturity benefit.
The whole life insurance plan is quite simple. You can purchase your life insurance policy for a low rate of premium and cover your entire life. In the event of your demise, your beneficiaries will receive the death benefit. You can also participate in a bonus program so your beneficiaries can avail of added financial benefits.
What is the difference between term insurance vs whole life insurance?
A term insurance policy is a life insurance plan that you can avail of for a shorter premium. You can opt for different forms of term insurance that can increase or decrease your sum assured.
These policies are available for 10-99 years as per your preference. Since the tenure can be shorter, the benefits are also limited. You need to opt for a return to premium option if you think you will survive the policy tenure.
A whole life insurance policy is available for 99-100 years. You can avail of the benefits for a low rate of premium but the duration of premium payments is slightly higher. If you are unable to pay the premium for the entire premium duration, your sum assured for paid-up benefits may decrease under the non-forfeiture clause.
Term insurance vs whole life insurance differs immensely in the savings element. You can opt for savings benefits at the end of a whole life insurance plan and avail of bonuses; a facility that is lacking in a basic term insurance plan but is available inadvertently with whole life insurance.
Additionally, the tenure of the term insurance is fixed during the conception of the policy whereas a whole life insurance is available throughout your lifetime. If you survive the latter, you receive the maturity benefit by default or your beneficiaries receive the death benefit.
Furthermore, you can avail of different forms of whole life insurance such as ULIPs or endowment plans to increase your lifetime payouts. They serve as investment plans to increase the sum assured as well as offer healthy profits during the policy tenure.
When should you purchase a whole life insurance?
A whole life insurance policy covers your entire life span. It is best to purchase the plan at an early life stage so you can avail yourself of the benefits of the policy for a much cheaper rate of premium.
Ideally, it is recommended that you purchase a whole life insurance plan in your 20s or 30s. Since the likelihood of chronic illnesses is limited during these life stages, your premiums will be much lower based on your medical history.
If you succumb to lifestyle habits that can result in health issues such as smoking, or have a family history of illnesses, you can also include riders to your whole life insurance plan.
It is also recommended to add these riders to your policy at an early stage, as the premiums will be lower but the benefits would help pay for treatments of critical illnesses, accidental death, etc.
Why you need a whole life insurance at an early life stage?
There are several benefits to having a whole life insurance plan, which are as follows:
- When you purchase a whole life insurance plan at an early life stage, you can avail of the benefits for low rates of premium.
- If your annual premium is less than INR 1.5 lacs, you can avail of tax benefits. This helps in cutting down your overall costs of a life insurance policy.
- Since your premium is low when purchased at an early stage, it is most likely that the maturity benefits you will receive upon surviving the tenure will also be within the taxation limits. Therefore, the maturity benefit can serve as an excellent savings option.
- You can start an investment habit by purchasing a ULIP option with your whole life insurance plan. This helps you earn profits from market investments that you can withdraw during your life in terms of financial crunch.
Purchasing whole life insurance at an early life stage helps you build your corpus throughout your life.
Conclusion:
A whole life insurance policy provides peace of mind that your beneficiaries will be well taken care of in the event of your demise during any life stage. Additionally, you can reap the benefits of tax exemption and build a savings routine so financial upheavals don’t affect you in the long run.
