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What is a Whole Life Insurance Policy?
A whole life policy as the name suggests is a type of life insurance policy designed to provide insurance coverage to the insured for the entire lifetime. A whole life insurance policy is insurance coverage that lasts until a lifetime. It is a type of policy that offers permanent insurance coverage provided the all due insurance premiums are paid. In the event of the death of the insured during the policy tenure, the policy guarantees death benefits to the nominee. While in the event of the survival of the policyholder then matured endowment coverage is offered to the insured as maturity benefit.
A whole life policy is designed to offer insurance coverage for the lifetime i.e. as long as the insured lives. A whole life policy can be explained with a simple example as under:
Akash is 30 years and opts for a whole life insurance policy with a premium paying term of 15 years. Being a limited paying whole life plan the premium payment will continue till Akash attain 45 years of age, however, the insurance cover of a whole life policy will be extended to the entire lifetime i.e. the risk cover will continue until 99 years or until the death of Akash. Thus, in a whole life policy, the risk coverage is for a complete life.
Types of Whole Life Plans
A whole life insurance policy is for an individual who wishes to avail of insurance coverage for the entire life. The policy is designed to offer risk coverage against the death of the insured irrespective of what age it might happen. Thus, a whole life plan does not come with a fixed policy tenure and is expected to cover up to insured lifetime or let’s just say till 100 years of age. The whole life plans are classified into the following categories:
|Type of Whole Life Plan||Particulars|
|Non-Participating whole life insurance||Under this policy, as the name suggests, the plan is designed to not provide the dividend or bonus through this plan. This plan offers features like risk coverage for an entire life, level premium i.e. fixed premium amount for the entire premium paying tenure, and face amount. Being a non-participating whole life plan the premium amount is comparatively less as the plan does not pay dividends or bonuses.|
|Participating Whole Life Insurance||As the name suggests, this plan is designed to offer risk coverage against the death of the insured and pass on the benefits like dividends or bonuses to the insured.|
|Pure Whole Life Insurance||As the name suggests, this plan is designed on the lines of a pure term insurance plan. Under a pure whole life insurance policy, the insured has to pay the premium amount throughout the policy tenure i.e. till he/she is alive while in the event of the death of the insured the death benefit is paid to the nominee or the beneficiary.|
|Limited Payment whole life insurance||As the name suggests, under this plan the insured is required to pay the premium amount for a limited period while the insurance coverage is offered for the whole life i.e. till the death of the insured or 100 years whichever is earlier. As it is a limited payment plan the premium amount is higher as compared to the other whole life insurance plans|
|Single-Premium whole life insurance||Under this plan, the whole life insurance coverage can be opted by paying the entire premium amount in one go. In the event of the death of the insured the beneficiary or the nominee is paid the death benefit in a lump sum.|
Benefits of Whole Life Policy
A whole life insurance policy offers a wide range of benefits to the insured. The following is the list of benefits offered by the whole life policy:
- Whole Life Insurance coverage:
The basic fundamental benefit offered by a whole life policy is to offer insurance coverage to the insured for his/her entire life. A whole life policy is unlike other insurance policies all other life insurance policies cover the insured for a specific period. Being a whole life policy, the insurance cover does not expire. The death benefit is paid to the nominee in the event of the death of the insured. If the insured outlives the policy tenure he/she will not receive any return.
Let's see the explanation with an example –
Ayan, a 25-year-old healthy make, purchases a whole life plan with a premium paying term of 20 years. Now, Akash opts for a whole life plan with an element of savings such that he would receive the maturity benefit at the end of 20 years, i.e. when he turns 45 years old.
This amount of money he can use for his entrepreneurial dreams or any to meet any other financial liabilities. However, Akash’s whole life plan continues till he lives or he is 99 years old, whichever is earlier, when his nominee would receive the entire sum assured and the policy would terminate.
A whole life policy is designed for assurance i.e. in the event of the death of the breadwinner the family is bound to receive the death benefit thereby their expenses are taken care in the absence of the breadwinner.
3. Tax Benefit:
The premiums paid towards the purchase of policy or payment of premium do not fall into the ambit of tax. The premiums paid are tax exempted under section 80C of the Income Tax Act upto INR 1.5 lakhs per annum. Similarly, the death benefit paid to the nominee is also tax-free under section 10 (10D) of the Income Tax Act, 1961 provided the sum assured is at least 10 times the annualized premium paid.
4. Source of Cash:
A whole life policy offers a loan facility i.e. insured can avail loan against his/her whole life policy thereby satisfying the need for money, provided the plan has a surrender benefit.
5. Peace of mind:
A whole life plan is the best option to leave a legacy for your dependents i.e. in the event of death the whole life policy will pay the benefit to the surviving spouse or children which they can utilize to overcome cash requirements. Thereby ensuring peace of mind to you as you will pass on the earned wealth to your loved ones.
What is Covered in a Whole Life Plan?
As the name suggests a whole life policy covers the risk of death of the insured. The policy is designed to offer insurance coverage for the entire life of the insured i.e. in the event of the death of the insured the death benefit is paid to the nominee which he/she can utilize to cover their immediate expenses like loan repayment, repayment of education loan, etc.
Additionally, if a whole life policy is coupled with an additional rider like Accident death benefit rider, Critical Illness Rider, Terminal Illness Rider, Permanent Disability rider, etc. the nominee shall receive an additional sum insured pertaining to riders. Thus, with the help of riders, an insured can make their whole life policy more robust.
What is not Covered in a Whole Life Plan?
A whole life policy does not cover certain types of death as mentioned below:
- Death due to intoxication
- Death due to accident caused due to driving under alcohol influence
- Drug overdose
- Death due to committing illegal activity
How does a Whole Life Policy Work?
A whole life policy is designed to provide you with guaranteed lifelong protection. The main reason to opt for this plan is to create a financial cushion for loved ones in the event of the death of the insured. The plan offers financial stability to the loved ones in absence of the insured.
A whole life policy offers the death benefit to the nominee in the event of the death of the insured while in event of survival of the insured till the end of policy tenure survival benefit is paid to the insured along with bonuses (if any).
Eligibility and Documents Required for Buying a Whole Life Policy
The eligibility criteria for a whole life plan will change from one insurance provider to another, however, the following eligibility criteria are mostly considered for a whole life plan by numerous insurance providers:
|Minimum Age at Entry||18 Years|
|Maximum Age at Entry||65 Years|
|Maturity of the policy||Usually, 99-100 years, or death, whichever is earlier|
|Premium Paying Term||As per the insurance provider but usually, it is 10 years, 15 years, 20 years, 25 years depending upon the age at entry|
The following is the list of documents required for buying a whole life policy:
- Proof of identity: Copy of Aadhar Card, PAN card, Driving License, or Voter ID
- Age Proof: Copy of Aadhaar Card, Passport, School Leaving Certificate, Birth Certificate, etc.
- Income Proof: Copy of salary slip or bank statement, however, most of the insurance companies grant 20 times of annual income as insurance cover
- Medical Reports: If the prospective policyholder is suffering from any pre-existing medical condition then the company may ask for certain specific medical reports or may ask to undergo medical tests
- Photographs: Recent passport-sized photographs are required
- Proposal form: A prospective insured is required to fill in all the required details in the proposal form provided by the insurance company.
Who Should Opt for a Whole Life Plan?
A whole life insurance plan is one of the most suitable types of insurance plan as it provides security and savings at the same time. It is suitable for individuals:
- Seeking insurance cover for a longer tenure
- Wish to leave behind a legacy for their loved ones and family
- Wish to have financial independence during the retirement years of their life
- Having financial liability, as a whole life plan can be used to avail loans
- Wish to avail tax exemption under sections of Income Tax Act, 1961.
List of some of the Best Whole Life Policies in India (2022)
|Plan Name||Age at Entry||Maturity Age||Policy Term||Sum Assured|
|HDFC Life Sampoorna Samriddhi Plus|
Min – 30 Years
Max – 60 Years
Min: 15 years
Max: 40 years
Min – INR 65,463
Max – No upper limit
|Aegon Life Guaranteed Income Advantage Insurance Plan|
Min – 20 years
Max – 60 Years
|85 years||85 years – age at entry|
Min – INR 1,00,000
Max – No Limit
|IDBI Federal Whole Life Insurance|
Min – 18 years
Max – 55 Years
|100 years||100 years|
Min – Depends on the age at entry and Premium Paying Term
Max – No limit
|SBI Life Subh Nivesh|
Min – 18 years
Max – 60 Years
|65 years||15 years – extended life cover up to 100 years|
Min – INR 75,000
Max – No Limit
|Tata AIA Life Insurance Fortune Maxima|
Min – 30 days
Max – 60 Years
|100 years||100 – the age at entry|
Single-Premium – 1.25 times the premium amount
Limited Pay – Higher of 10 times of annualized premium or 0.5*policy term* annualized premium
Whole Life Policy Tax Benefits
Whole life insurance policies allow the tax benefits on premiums paid and, on the benefits, received under the policy. However, some of the benefits are treated differently as under:
|Tax Benefit Section||Tax Benefit Allowed|
|Section 80C||The premium paid towards a Whole Life Insurance policy is eligible for tax deduction U/S 80C up to INR 1.5 lakhs per annum|
|Section 80D||If the Whole Life Plan has a health rider, then the premium paid towards the same would qualify for a tax deduction U/S 80D upto INR 25,000 per annum|
|Section 10 (10D)||The maturity proceeds received from a whole life insurance plan is tax-free provided the premium paid in any year is not more than 10% of the sum assured. While the Death Benefit paid to the nominee is tax-free except in the case of a Keyman insurance policy.|
Whole Life Insurance Riders
Riders are additional and optional benefits offered by life insurance providers in order to make your whole life plan robust. The rider option differs from one insurance provider to another. The following is the list of commonly found riders that can be attached with a whole life policy:
|Accidental Death Benefit Rider||As the name suggests, in the event of the death of the insured due to an accident, the nominee shall receive the rider sum assured in addition to the death benefit paid under the policy.|
|Critical Illness Benefit Rider||This rider is designed to provide an extra financial cushion to the insured in the event of diagnosis of a critical illness|
|Terminal Illness Benefit Rider||A terminal illness rider is designed to provide you with additional financial protection if you are diagnosed with a terminal illness|
|Accidental Total and Permanent Disability Benefit Rider||In the event of permanent or total disability due to an accident the insurance company pays the rider sum assured.|
Whole Life Policy FAQs
1. Is income received from a whole life plan taxable?
Under section 10 (10D) of the Income Tax Act, the income from the whole life policy is not taxable provided the premium paid in any year is not more than 10% of the sum assured.
2. Is there any minimum lock-in period for a whole life plan?
No, there is no minimum lock-in period for a whole life plan. It is best to read all the terms and conditions of the policy before investing.
3. Are there whole life plans with 100% guaranteed returns?
Yes, a whole life plan insurance offers 100% guaranteed returns however it is recommended to get in-detailed information before investing.
4. Which is a better investment: Fixed Deposit or 100% Guaranteed Returns Plan?
Comparing between fixed deposit and 100% guaranteed returns plan is not advised as both of them have their own set of advantages. Fixed deposit is good for short-term investment while a guaranteed returns plan is a better option for long-term investment. Therefore, investing in either of the instruments must be based on an individual’s financial goals and needs.
5. How much life cover is offered in a whole life policy?
The whole life policy offers a full life cover i.e. till the death of the insured or 99 years whichever is earlier.
6. What is cash value in a whole life insurance policy?
Cash value is the corpus built under your whole life insurance policy created by investing a portion of your premium amount.
7. Which is the best whole life policy in India?
In India, there are many insurance providers that offer the best whole life plans. An individual must carry out extensive research based on their financial needs and goals before investing.
8. How much maturity amount will I get under a whole life policy?
Matured Endowment Coverage is provided as maturity benefit under a whole life policy
9. What if I stop paying a premium for the whole life policy?
If you stop paying a premium for a whole life policy then all the benefits of the whole life policy will cease to exist.
10. Can I surrender my whole life policy?
Yes, in this case, the insurance provider will provide you with the amount equivalent to the surrender value.
11. Can I withdraw money from my whole life policy?
Yes, partial withdrawal of money is allowed under a whole life policy
12. Can I avail loan on my whole life policy?
Yes, you can avail loan on your whole life policy.
13. Is investing in whole life insurance a bad idea?
No, investing in whole life insurance is a good investment tool as it helps to cover the risk for the entire lifetime and helps in leaving a substantial corpus for your loved ones.
14. Which is a better investment: Term life or Whole life insurance?
Both Whole Life Insurance and Term Insurance plans have their own set of advantages, therefore, it is important to ascertain one’s individual financial needs and goals as then only an individual will obtain a clear understanding about which is a better investment.
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