Whole life insurance is a long-term insurance plan where you can not only enjoy a sufficient life cover during your earning years but also can use the policy for the emergency fund after your retirement. You can best use this policy as a lifetime emergency backup plan for yourself and your family. And, in the best-case scenario, this policy will double up as a tax-free estate for the next generations.
A whole life plan is the most common form of permanent life insurance. It stays all through the insured entire lifetime provided the premiums are paid. A certain previously mentioned sum is paid to the nominee in the event the insured dies. The policyholder whenever can withdraw the policy or borrow against it. The maturity age for this policy is 100 years. The death benefit under this policy is tax exempted. You can study the various whole life insurance plans online too and opt for it if:
• You have made investments towards your post-retirement requirements and are seeking other opportunities to invest in.
• You own an estate and wish to plan and bequeath your estate and savings to your beneficiaries and transfer your wealth.
• You are a young professional who has started with his/her career and will be able to make premium payments for a considerable time going into the future.
Why you should buy whole life insurance
1. Cover for life
The insured will get cover for his entire life, unlike other life insurance plans that are fixed for a certain period. The other life insurance plans will expire, and it will be expensive to take another one when you want one. In the event you die, a lump sum tax-free amount is paid to the nominee. If you outlive the term, you will not receive any return. For example, if a 25-year-old takes a whole life plan, he will receive a lump sum payment at the age of 45, the age at which his 20-year premium payment term will expire. He can use this money for his retirement, and also his cover will continue till he turns 100 or till the date he dies.
2. Assurance of coverage, periodic payments and tax benefits
The survival benefits will be built over time which keeps increasing eventually. You will get lifetime coverage along with guaranteed level premiums for a limited premium payment term. The premium is constant throughout the premium payment term. The sum assured is guaranteed and the bonuses are declared based on the performance. Some companies offer survival benefit from the end of the premium payment term till the policy matures. Tax benefits are also available to the insured under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
3. Serves as a source of cash
Financial experts believe that a person must keep 6-8 months of living expenses in the form of a liquid asset. It is, however, difficult to reserve such huge cash while meeting retirement and long-term saving goals. But, with a whole life plan, you can get the cash at the end of the premium payment term.
4. Loan option available on your whole life plan policy
The surrender value of the policy increases over time, and you can borrow against the policy’s surrender value at any time. This is a better alternative to borrowing against home or retirement accounts.
5. Your dependents will benefit from this plan
The return will prove to be an additional financial source in the family. This plan is ideal for estate planning individuals who want to pass on their estate to their legal heir as it helps create wealth.
Even though it might seem like you need to pick between whole and other kinds of life insurance, the fact is that most secure financial plans normally incorporate a blend of various kinds of policies, perhaps term and whole life insurance. This can give you greater flexibility to prepare for any of life’s numerous possibilities. A financial expert can help you find the correct mix of insurance policies and show you how it fits into your overall financial plan.
Frequently Asked Questions
1. How is whole life insurance as an investment?
While whole life insurance mostly serves the purpose of providing protection, the single premium whole life insurance policy is a particular kind of policy that offers the dual purpose of not only providing insurance cover but also acts as an investment.
2. Can I borrow against my whole life insurance policy?
A whole life insurance policy not only provides cash value but also has no date of expiry, which enables the policyholder to easily borrow against such a policy. For more details regarding borrowing against your whole life insurance policy, you can contact your insurer who can guide you better.
3. What is the death benefit in a whole life insurance policy?
The death benefit is the annuity or pension which is paid to a beneficiary after the passing away of the life insured. The same concept is followed in whole life insurance policies where the beneficiary gets the amount of the life insurance policy as a lump sum or through regular payments following the insured’s death.
4. Is a whole life insurance policy suitable for after retirement income?
Indeed. A whole life insurance policy will build cash value that can be used as a retirement reserve. The survival benefits paid can give you a customary stream of regularincome to meet your post-retirement monetary necessities.
5. What is the Eligibility Criteria to Buy Whole Life Insurance?
The life insurance policyholder ought to be financially independent and should be over the age of 18 years. The maximum entry age is 60 to 65 years.