Whole life insurance explained: is it the right policy for you?

A whole life insurance policy offers coverage to the concerned policyholder for the entire life, up to 99 years of age. It also guarantees a death benefit to the designated beneficiaries on the demise of the policyholder, ensuring quality financial support to all the family members.
This sort of policy does not only allow coverage options, it is also a strong investment tool, qualifying for tax deductions. A whole life insurance plan offers both maturity and death benefits, offering the exclusive scope for fund growth to achieve financial targets.

Types of whole life insurance plans

There are several types of whole life insurance plans, including:

1. Limited payment: Here, the premium amount is limited for certain pre-fixed years, beyond which you can enjoy the plan coverage for a lifetime. However, the premium rates may tend to be comparatively higher than other insurance products.
2. Single premium: Here, you need to pay the premium in a single lump sum and enjoy the policy benefits for a lifetime. It is a great investment avenue to utilize extra funds.
3. Modified whole life plan: Here, you need to pay low premium amounts for a few initial years, and it gradually increases with time. But, the coverage remains unaltered.
4. Variable whole life plan: This plan allows you to invest through premiums, meeting investment goals. It allows wealth creation, tax deductions, financial protection, and cash value growth.
5. Joint whole life plan: As the name suggests, this allows coverage for two individuals together under a single policy. If one of them passes away, the other person is eligible for benefit claims. However, they usually do not offer any survival benefits.
6. Participating whole life plan: They offer benefits along with variable bonuses linked to the profits of the company, either in the form of bonuses or dividends, which can be used to earn interest.
7. Non-participating whole life plan: They offer guaranteed maturity benefits but do not offer any scope to participate in the company’s profits.
8. Pure whole-life policy: Here you need to pay regular premiums to enjoy whole-life coverage. It also offers death benefits to the nominees or beneficiaries after the demise of the policyholder, who has to be the insured individual.
9. Level premium whole-life plan: Here the premium payable amount remains unaltered throughout the plan tenure. It offers a guaranteed sum assured as a death benefit to the nominees.
10. Intermediate premium: Here, there is no fixed amount of premium amount throughout the plan term. Depending upon the relative costs, the companies may alter the premium.

What is the difference between term insurance and whole life insurance?

A comparative study of term insurance vs. whole life insurance will reveal all the major differences and clarify all the aspects well:

PARAMETERS	TERM INSURANCE	WHOLE LIFE PLAN
PERIOD	It covers a pre-defined tenure	It assures coverage for the entire life and extends up to 99 years
PREMIUM AMOUNT	Usually remains low	Comparatively higher offering life-long coverage
CASH VALUE	Usually no provision for cash value	Offers cash value benefits that grow with time
WEALTH CREATION	Not helpful for wealth creation	Aids in wealth-building
SUITABILITY	Ideal for individuals seeking solely insurance coverage	Ideal for those who are seeking insurance protection with savings/investment
POLICY LAPSE	Plan automatically lapses after a pre-determined period	The plan remains active as long as you continue paying premiums
LEGACY	Not suitable for leaving a legacy for the family	Ideal for wealth-building and leaving a legacy for your children

Is a whole life plan ideal for you?

A whole life term insurance proves to be ideal for everybody. However, it proves to be especially suitable for:

1. Legacy-seekers: The individuals who are willing to leave a legacy behind them must choose term plan investment.
2. Wealth creators: The individuals who seek wealth and corpus-building opportunities should consider term plan investment.
3. Dependents: Individuals who have financially dependent individuals
4. Retirement planning: Individuals who are seeking financially secure post-retirement life must choose a term plan investment
5. Tax benefits: Individuals seeking tax benefits through wealth creation opportunities with insurance coverage at affordable rates must ensure term insurance investment.

Is a whole life plan ideal for you?

Purchasing a whole life plan proves to be extremely beneficial, especially under the following circumstances:

1. In case you desire to leave a legacy back for your dependent family members and future generations
2. If you desire to enjoy term plan coverage, post your retirement
3. In case you are seeking lifetime coverage for critical ailments
4. If you are planning on a family extension
5. If you are seeking dual benefits of both insurance and investment
6. If you are willing to enjoy additional liquidity during retirement.

Conclusion

We have highlighted the ideal circumstances where whole life insurance proves to be ideally beneficial. If your situation matches any of those above-mentioned circumstances, you must ensure a reliable term plan investment to ensure advanced financial security. Moreover, if you buy early, you need to pay the minimal premium, without compromising on the coverage extent. As you age, the premiums tend to rise for identical coverage extent.