Whole life insurance policy is an a great investment that covers the policyholder till his death or till 100 years. The policyholder has to pay premium at regular intervals to avail this plan. The benefits includes Whole life insurance, Tax benefits, Dependents financial stability, etc . Lets discuss whole life insurance in detail in the forthcoming topics.
Whole life insurance is most suitable for long term insurance and fixed returns. 99% of the policyholders wont survive till 100 years and hence this policy has fixed returns. Here the payment terms differ as it is enough for the policyholder to pay for first 10 to 15 years. Further the policy exists for whole life. For example, A person buys whole life policy at the age of 35.
The policyholder has to pay the premium up to the age of 50 afterwhich the policy continues. The nominee receives the death benefit once the policyholder passes away. This serves as a financial support for the policyholders family
Previously, Policyholders werent having much options to choose from. Insurance providers were having the same policies with different names. Further, the insurance providers started to introduce new policies in the market. They started to meet the different needs of the customers. The most common types of Whole Life Insurance are:
- Level Premium.
- Limited Payment.
- Single Premium
- Indeterminate Premium
Lets imagine Ravi wants to provide financial security to his wife during his adulthood. He Buys a Whole Life Insurance Policy and assignes his wife as Nominee. while initiating the policy at the age of 30 and pays regular premium of 600 Rs. Monthly for a life cover of 1 Cr. He pays the premium up to the age of 45 years.
Later when he retires from his job and lives his last days he feels comfortable that his absence wouldn’t disturb his wife’s livelihood. Death is unavoidable and one day Ravi passes away at the age of 80 years. He has assigned his wife as Nominee while initiating the policy. Once the policy documents are verfies the nominee receives the Life cover of 1 Cr.
CAFS Financial advisors advice you to understand the insurance tharoughly before choosing one. The investor should understand the benefits, terms and conditions before choosing a policy. The age, gender, benefits and health condition of the policyholder determines the premium of the policy. At last the policyholder decides the nominee. The nominee receives the cover amount once the policyholder passes away.
The insurance provider proposes the premium to the policyhodler. The policyholder has to pay the premium amount on regular invertal. The regular payment avoids fines levied from the insurance provider. The payment duration of a whole life insurance policy falls between the bracket of 10 to 15 years. Afer which the policyholder doesn’t have to pay premium. The plan continues till the policyholder reached 100 years.
In most cases, the policyholder passes away before the age of 100 years. Once the policyholder passes away the nominee receives the cover amount. As there are a considerable amount of whole life insurance policies in the market. The difference in their process differs to some extent.
Insurance rider is an added investment made with the premium of the policy. Every policyholder will be having different requirements based on their life. Insurance riders support such needs. They provide extra features to the current insurance policy. Below are few most bought Insurance riders.
1. Accidental death benefit rider
When the policyholder purchases this rider the nominee will receive an extra death benefit. Provided the policyholder death occurs during an accident. With this rider the nominee gets an extra sum assured on the purchased policy. Below are the characteristics of policyholders who choose this rider.
- A person who travels a lot with regard to work or personal needs.
- People who are expenses to risky work environments like manufacturing.
2. Critical illness rider
When the policyholder feels like he might become ill in future he can opt for a critical illness rider. This rider includes critical illnesses like heart attacks, strokes, cancer, kidney failure etc,. This rider helps people to manage their critical illness expenses. Policyholders who can opt for this rider are:
- People who posses critical illnesses by heredity.
- A person who is the beginning of any such illnesses.
3. Waiver of premium rider
With this rider, the policyholder doesn’t have to worry about the payment period of the policy. This rider covers the policyholder even during the payment period. If the policyholder dies between the payment period the policy stays alive. Below listed characteristics, people can opt for this rider.
- Policyholders who want their nominees to receive the death benefit at any cost.
- A person who travels every day and is more prone to accidents.
4. Accidental disability rider.
The policyholder receives a certain amount for any permanent/temporary accidental disability. This rider support policyholders to manage their expenses incurred during an accident. Below characteristics of the policyholder can prefer this rider.
- A person who does a lot of travel by bike.
- A person who works in an environment that poses a high risk of damage.
5. Accelerated Death benefit rider.
The policyholder faces any critical illness he receives a certain amount for recovery. These illnesses include cancer, organ failure, other deadly diseases etc,. This rider helps the policyholder receive an advance amount from the death benefit. The same can be used for treatment expenses. The policyholder decides the advanced amount at the time of opting for this rider.
- A Person who feels he might get any critical illness in future.
- A Person wishing to save his treatment-related expenses.
Our financial advisors suggest investors to understand the rider advantage before owning one. As in general people own rider without knowing the actual benefit of the rider.
The majour difference between a whole life insurance and a term life insurance is the time period. Choosing one among them depends more on the investors financial needs. Lets discuss the difference between the two policies so that you can choose the most suitable policy.
Whole life insurance policy
- The whole life insurance policy consists of a policy period of 100 years for the policyholder.
- This policy provides financial savings as well as life protection.
- The policyholder receives dividends from the investment made from his paid premium.
- The insurance provider will consider the paid premium as collateral for loans.
- The above benefits come at a cost hence whole life insurance policy costs more than term insurance.
- The whole life insurance policy has the same premium thought-out the payment period.
- With this policy, the policyholder has fixed benefits.
Term Insurance policy
- In a Term insurance policy, the policyholder decides the term period of the insurance policy.
- The policyholder only has a death benefit.
- There are no such benefits of profit sharing.
- The policyholder receives no collateral with term insurance.
- Term insurance is cheaper than whole life insurance.
- This policy has different premiums based on the policy.
- The policyholder receives the benefits only if he passes away within the term period of the insurance policy.
Learn more about Term Insurance.
Each insurance policy differs from one other in terms of age, maturity benefit, payment period and premium. In general the age bracket has an limation between 18 to 65 years. Every policyholder should be an independent earner and should be eligible to pay the policy premium.
In general, the policy matures when the policyholder reached 99 years. The policyholder will be eligible for life cover if he dies before the maturity period.
This insurance policy is a essential investment for a families financial stability. Most of the breadwinners of Indian families are males. If any unavoidable death happens to the breadwinner the family could face a financial crunch. An Investment in insurance will be a great relief for the family to avoid any financial instabilities. Below is a list of benefits and we will discuss the same in detail.
This policy provides coverage up to 100 years. This benefits the policyholder as he doesn’t have to worry about receiving the insurance cover. Wherein other plans offer a certain term period. Beyond that term, the life cover isn’t applicable.
Assured insurance cover and payment period
Under Whole Life Insurance, the policyholder doesn’t have to worry about the cover as it is fixed. Most of the policies have payment periods between 10 – 15 years. The policy continues even after the policyholder completes the payment period.
Section 80C and Section 10(10D) of the Income Tax Act, 1961
This section is specially for tax deductions on life insurance covers. Section 80C offers tax benefits up to 1.5 Lakh on the death benefit.