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Whole Life Insurance

Whole life insurance is a type of life insurance that provides you with financial protection till the age of 99 years. ...Read More

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Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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What Is Whole Life Insurance?

image-star image-star image-star image-star image-star image-star image-cloud image-cloud image-cloud moon What Is Whole Life Insurance

A whole life insurance plan is a plan that provides life cover for the whole life of the policyholder. It may extend to 99 years of age.

Whole life insurance policy promises to pay a death benefit to the beneficiaries of the policyholder upon his demise and takes care of the financial well-being of the dependents.

Along with offering a saving option and insurance coverage, it is a great financial tool as it assists in tax exemption.

Along with offering death and maturity benefits, individuals can build a corpus that grows with time. This amount can be further utilised to fulfil financial goals in life.

It is an ideal option for those who want to build a legacy for their upcoming generations. It also helps in building savings habits among policyholders.

Types Of Whole Life Insurance Policies

Whole life insurance policies can be further categorised into the following categories: 

1

Limited payment of whole life insurance

In this type of life insurance, you need a premium amount for limited or certain years, let's say 15 or 20 years. After that, you can enjoy policy coverage for the entire lifetime. However, the premium charged may be higher as compared to other plans as the time span to pay premiums is limited.

2

Single premium whole life insurance policy

In this whole life plan, you pay the premium in a single lump sum amount. For a one-time payment of a premium, you can enjoy financial coverage for the rest of your life. It can be an ideal option for those with extra funds to park and look for insurance, as well as an investment avenue.

3

Modified whole life insurance

It is a type of whole life plan in which you pay low premium amounts for a few initial years. The premiums to be paid increase with time, and the coverage remains the same through the policy. This type of policy is advisable only if you are confident to pay high premiums in the future. 

4

Variable whole life insurance

This type of whole life insurance plan allows policyholders to invest money through premiums paid and meet investment goals. It offers tax deductions, wealth creation, cash value growth and financial protection for loved ones.

5

Joint whole life insurance

This type of plan provides coverage to two individuals jointly under one plan. If one of the policies passes away, the other one can claim the benefit. These plans usually don’t offer survival benefits. 

6

Participating in a whole life insurance policy

Along with benefits, this type of policy offers variable bonuses that are linked to the company's profits. The benefits can be in the form of dividends or bonuses. The dividends can be used to offset future premiums or to earn interest. 

7

Non-participating whole life insurance policy

These policies do not offer an opportunity to participate in the company’s profits or earn dividends. It offers guaranteed maturity benefits irrespective of the amount of profits earned by the company.

8

Pure whole life plan

Under this policy, you have to pay premiums, and in return, you receive financial coverage for your whole life. Upon your demise, beneficiaries or nominees can avail of death benefits.

9

Level premium whole life insurance

In this, the amount of premiums remains the same throughout the policy tenure and doesn’t change for any reason. Upon the policyholder’s demise, the guaranteed sum assured is given to the nominee/beneficiary. 

10

Indeterminate premium

In this, there is no fixed premium amount across the policy term. The companies may change the premium amounts according to the costs. 

Benefits Of Buying A Whole Life Insurance Plan

The benefits of buying a plan for yourself are mentioned below:

1

Financial security

Whole life insurance policies provide financial coverage and bring comfort to life. In case of unfortunate events, your family is taken care of. This is similar to the benefits of term insurance.

2

Death and maturity benefits

These plans ensure that at the end of the policy’s tenure, you get the sum assured. It builds a habit of saving and acts as an investment. Also, upon your sudden demise, it ensures your family’s life doesn’t get interrupted financially.

3

Tax savings

Deductions under 80C and 10 (10D) of the Income Tax Act or ITA 1961 allow you to avail of tax benefits regarding whole life policy premium payments and payouts. Hence, it helps in long-term financial planning

4

Wealth creation

Life insurance coverage plans accumulate wealth through the premiums you pay and thus help in wealth creation. You can use it to leave a legacy or fulfil retirement goals.

5

Loan facility

During emergencies, you can use these policies to avail of a loan facility. Hence, it comes in handy in unexpected situations.

6

Family support

A whole life insurance policy provides financial support to your family in your absence. It helps your children continue their studies, and your parents live a stress-free life without working during their old age.

Benefits of Whole Life Insurance Benefits of Whole Life Insurance

Features Of Buying A Whole Life Insurance Plan Coverage

Here are some primary features of the whole life policy:

Provides Financial coverage

Provides Financial coverage

These policies provide financial coverage for the entire life of the policyholder. These can extend up to 99 years of age. Whole life insurance is a type of term insurance that provides cover till 99 years.

Cash Value Component

Cash Value

Whole life insurance plans usually include a cash value component that grows with time. It can be used to fulfil financial goals such as buying a home, etc.

Earn Dividends

Dividend Features

Certain types of policies allow individuals to participate in the profits of the company and earn dividends.

Add-ons/ Riders

Riders/ Add-ons

Riders/add-ons : Life plans usually allow individuals to enhance the policy’s coverage by adding riders to the policy. For example with the critical illness rider you can avail critical illness insurance along with your term insurance.

How Does Whole Life Insurance Work?

Here’s a detailed description of how it works:

 

1. It offers lifelong protection and can extend up to 99 years of age. If something happens to you, your nominees receive a death benefit.

 

2. You pay premiums at regular intervals to get yourself insured. A portion of your premium goes towards savings. The amount grows over time, and you are eligible to access it later. It is also called cash value.

 

3. If you outlive the whole life policy, you are rewarded with a sum assured and bonuses that accumulate with time as a reward.

 

4. It provides financial security to your loved ones in case of your unexpected demise and helps them live a comfortable life. Also, it helps them pay off your debts, if any.

 

5. You can use the cash value to fulfil your financial goals, like buying a home, marrying your children, etc.

What Is The Difference Between Term Insurance & Whole Life Insurance?

 

Parameters

Term Insurance

Whole Life Plan

Time period

Term insurance plan covers for a specific duration.

Whole life insurance plan provides coverage for the whole life and can extend up to 99 years of age.

Premium amount

The premium amount is usually low.

The premium amount is comparatively higher as it provides life-long coverage.

Cash value

It usually does not offer any cash value.

It offers cash value that grows with time.

Wealth creation

It does not assist in building wealth.

It helps in wealth creation.

Suitability

It is ideal for individuals who only want insurance.

It is suitable for individuals wishing for insurance along with investment/savings.

Lapse of policy

The policy expires after a certain time period.

The policy doesn’t expire as long as you keep paying premium amounts.

Legacy

It may not be an ideal option for building/leaving a legacy for your children.

It is an ideal option to build a legacy and create wealth for your children.

What Are The Whole Life Insurance Riders?

Riders can be termed as add-ons, which can enhance the coverage of the policy. These riders may add to the premium amount but always come in handy in uncertain times. A few of them are mentioned below.

Waiver of Premium Rider

Waiver of Premium Rider

In this rider, if the insured is diagnosed with a critical illness or met with an accident that left him disabled, the future premiums will be waived while the policy will still remain in force.

Accidental Death Benefit Rider

Accidental Death Benefit Rider

In this rider, the insurance company pays an additional payout to the nominees or beneficiaries in case the policyholder passes away due to an accident.

Accidental Total Permanent Disability Rider

Accidental Total Permanent Disability Rider

In the accidental total permanent disability rider, if the policyholder is diagnosed with total permanent disability due to an accident, the insurance company will pay the rider the sum assured to him to cover the medical costs.

Critical Illness Rider

Critical Illness Rider

In this add-on, if the insured is diagnosed with a critical illness, the rider can take care of the financial expenses and obligations, including organ transplants, heart treatments, etc.

Terminal Illness Benefit

Terminal Illness Benefit

In this rider, the nominee or the beneficiary receives the sum assured on the insured’s demise after he’s diagnosed with a terminal illness.

You must always select riders or add-ons based on your needs or requirements and must not hesitate to add them to your policy even if they add up to the cost.

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Who Should Purchase A Whole Life Insurance Plan?

While everyone is advised to buy a whole life insurance policy, it is a non-negotiable for salaried individuals. It is highly recommended for:

 

  • Individuals who want a legacy for their future generations.
  • Individuals who wish to create wealth and provide a corpus for their families.
  • People who have dependents who rely on them for their financial needs.
  • Individuals who wish to save for their post-retirement years and live a peaceful life.
  • People who wish to save taxes and build a savings habit. 

Eligibility Criteria For Buying Whole Life Insurance

Below mentioned the entry and maturity ages for whole life insurance

 

Sr No.

Eligibility Criteria

Ages for Buying

    1

Minimum age of entry

18 years

    2

Maximum age of entry

65 years

    3

Maturity of policy

99 years

How To Buy A Whole Life Insurance Plan Online?

In today's digital age, you can buy an insurance policy online within a few steps.

 

To purchase whole life insurance, follow the below-mentioned steps:

 

1. Visit the official website of HDFC Life and visit the life insurance section.

 

2. Enter your details such as name, age, gender, contact information and date of birth.

 

3. Choose 99 or 100 years as your maturity age.

 

4. Now fill in your personal information such as income, occupation, addictions, education, health conditions, etc.

 

5. Complete the purchase by making a payment and successfully complete the process. 

What Are The Factors To Consider When Choosing A Whole Life Insurance Plan?

Certain pointers you must keep in mind before buying a permanent life insurance policy are:

1

Coverage amount

It is a must to calculate life coverage after assessing family needs, expenses and goals to choose the right coverage amount. The amount should be enough to fulfil the family’s financial obligations and responsibilities.

2

Inflation

Potential inflation, rising living costs and expenses must be considered while choosing a plan. For example, Rs 2 cores might be sufficient to live a comfortable life today, but after 25 years, it will lose its value. 

3

Early investments

It is crucial to note that early investments can buy you policies at much lower premiums. Hence, it is advisable to buy a plan while you’re young and healthy and have long years to pay premiums. 

4

Select add-ons

Add-ons are a great way to enhance the coverage of a permanent life policy. Hence, you can choose certain add-ons depending on your needs and requirements. 

5

Go through the policy document.

You must understand and go through the policy document to understand the terms, conditions, coverage and other details. Inclusions and exclusions must be carefully analysed to avoid chaos in the future.

FAQs On Whole Life Insurance

1 Is it good to invest in a whole life insurance plan?

Whole or permanent life insurance is worth investing in when you have dependents who rely on you financially. It ensures that your loved ones are taken care of when you are no more. 

2 Should I buy a whole life insurance plan for my child?

It is a great option for your child as it protects them for your entire life span. The savings component grows with time and protects your child’s future if something unfortunate happens. So, if you believe your child may need financial support in the future, you can choose them as your nominee. 

3 Is buying a whole life insurance plan expensive?

If you compare the premiums or costs involved with other policies like term insurance, then it is certainly costlier. But when you compare the benefits and features, you will find that it helps you leave a legacy for your dependents, which might make the investment worth it. 

4 How much coverage should I consider while buying a whole life insurance plan?

You must assess your family’s future living costs, inflation, debts, cost of living, financial goals, etc., to calculate the exact coverage amount. Or you can multiply your annual income by 10 for a rough estimate. Certain online calculators can also make your job easy. 

5 What are the 4 main types of whole-life insurance policies?

Whole life plans usually have various options such as single premium, variable, limited payment and modified whole life. 

6 Can you develop a financial legacy with a whole life policy?

Yes, it is one of the reasons why individuals opt for a whole-life policy. Along with providing coverage for your whole life, which can extend to 99 years of age, it helps in wealth creation and leaving a legacy for your loved ones. 

7 What is the right age to buy a whole life insurance plan?

The general rule of thumb is the earlier, the better. Hence, today is the right age to buy any permanent life insurance policy.

8 Which is better: a whole life insurance plan or a term life insurance plan?

While making a choice between the two, it is crucial to consider certain factors like your financial condition, goals, coverage, premium amounts, age, purpose, etc. Hence, there is no single policy that is suitable for everyone. 

9 What is the death benefit under the whole life insurance policy?

The death benefit of a permanent life insurance policy is a predetermined amount or sum assured that is paid to the beneficiaries of the policyholder upon his demise. 

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Disclaimers

#Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions.

#Tax Laws are subject to change from time to time.

#Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

##As per the number declared in the investor presentation. View here.

ARN - ED/03/24/10440