Term Insurance 644 views February 2, 2018

Whole Life Insurance Policy

Whole life term insurance paves the way for assured life cover as the policy period extends until the policyholder turns 100 years of age. The guaranteed death benefits not only help protect the insured but can go a long way in creating a legacy for them.

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Indians are yet to understand the importance of buying term insurance. In most of the cases, ignorance about how paying for a term insurance policy can help ensure the lives of loved ones has resulted in many families reeling under tremendous economic crisis as the sole breadwinner succumbs to unfortunate circumstances. There are, however, others who refrain from buying term insurance plans complaining that their dependents would not avail any death benefits in case they outlive the policy period.

Whole Life Insurance Policy

Most people tend to ask why paying for whole life insurance serves better than buying a regular term plan where the nominee(s) is entitled to death benefits only if the insured dies during the policy period. The answer lies in the extended policy coverage till the age of 100 years, i.e., the insurer is liable to pay the sum assured to the dependents(s) even if the policyholder dies at the age of 99 years. However, whole life term insurance plans do not have benefits limited to only extended policy terms.

Other than the payout which is guaranteed to the dependent(s) of the policyholder, the insurer also returns the cash value to the policyholder in case he or she decides to end the policy. The cash value is the total amount of premiums the policyholder pays towards whole life term policies that he or she receives back from the insurer after having intimated the latter to cancel the policy. The benefit of the cash value getting converted into paid-up value, when required, is unlike any benefit corresponding to term insurance plans.

Whole Life Insurance Plans Cost More

Good things come at a great price. This is true of whole life insurance plans too as the premiums towards paying for these policies are much more than the premiums charged on regular term life insurance plans. But unlike term insurance plans, where one has to pay an increased premium rate at the time of renewal, the premiums on whole life insurance plans are fairly constant, i.e., one does not have to spend extra on premiums on getting their whole life policies renewed.

Currently, only three insurance companies in India are catering to the demands of customers looking for whole life insurance policies. Details of the various whole life insurance plans coupled with their policy periods and premium rates are listed below. The details have been prepared to assume that the customer looking to buy a whole life insurance policy is a 30-year old non-smoker male.

InsurerAegon LifePNB MetLifeHDFC Life
Insurance PlanAegon Life iTermPNB MetLife Mera Term PlanHDFC Life - Life Long Protection Option
Sum Assured (in INR)50 lakhs50 lakhs50 lakhs
Covered Upto (in Yrs)10099100+
Claim Settlement Ratio97.1%91.0%97.6%
Monthly Premium (in INR)7498682,082
Yearly Premium (in INR)8,6149,79424,204

Why should you buy whole life insurance?

In most cases, regular term plans are looked upon as simple savings instruments that help save and protect the financial interest of the family in case of sudden death during the policy term in addition to serving as effective tax-saving instruments. Paying for whole-life insurance policies takes a whole new form with people continuing to pay for it for prolonged periods in a bid to leave behind a certain sum in addition to the amount already earned and saved.

The idea of taking a whole life term policy resonates with wealth creation and conservation in addition to that accumulated during one’s lifetime. The interest earned on one’s earnings till the date of retirement also invites tax, thus, leaving behind very little to further earnings and consequently savings. Forcing oneself to continue paying for whole-life insurance plans ensures a definite amount that goes a long way in wealth creation.

While the debate to choose between simple term insurance and whole life insurance continues, one can consider opting for the latter if he or she is considering to build up a legacy as a gift to the nominee(s) concerned. In addition to the fact that death benefits help to pay off loans and ensure the financial security, it can also be a parting gift from guardians to their wards so the latter may continue to live a better life in their absence.