Why is whole life insurance the right choice for you?

by Abhishek K. Digital Business Executive

A whole life insurance policy or permanent life insurance provides life coverage until the death of the life assured and stays in force for as long as the premium is paid as stated. The sum assured or the amount covered is decided at the time of policy purchase and is paid to the nominee at the time of death claim. However, if the death of the life assured occurs before the age limit stated in the policy, the nominee receives the sum assured.

 

Say Mr. Gupta who is 30 years old buys a term plan for 35 years, meaning his coverage lasts till he is 65. Assuming he passes on at the age of 66, there will be no pay-out to his beneficiaries. Assuming Mr. Gupta had invested in whole life insurance, in a similar scenario, his dependents obtain the sum assured as a death benefit.

 

Whole life insurance is permanent and it remains as long as the premiums are paid, as compared to term insurance where the benefits are greater and more lucrative for shorter periods and the premiums are lower. Further unlike term insurance plans, even if you cancel a whole life policy, the cash value is returned to you.

 

Further here are more reasons why you should invest in a whole life insurance policy-

 

1. Your premium payment is guaranteed and not variable- 

Depending on the term chosen, the premium amount continues to be constant throughout the life of the plan. 

 

2.      Death benefits-

In case of the death during the period of the policy and after premium payments being fully paid to date, the nominee is eligible to receive the total sum assured along with applicable accrued bonuses, if any. This stands out as the greatest benefit. 

 

3.      Periodic payouts-

Depending on the insurer there are some plans which extend survival benefits in the form of periodic payments. Now this means that the total accrued bonus till the completion of the premium payment term is handed out as a lump sum post in which a percentage of the sum assured is paid out till the end of the life insured or completion of the policy term.

 

4.      Tax benefits-

The premium paid towards the policy is tax exempted under Section 80C of the Income Tax Act, 1961. As far as the nominee is concerned, the payout handed over is tax-free under Section 10(10D) of the Income Tax Act, 1961.

 

5.      Availing loans against the whole life policy plan-

 The surrender value of the policy keeps increases over time and most insurers allow borrowing against the policy’s surrender value at a given time. Now this is indeed a far better alternative to borrowing against assets or retirement savings.

 

Now ideally the following individuals easily opt for whole life insurance policies-

 

ü  You have already made investments for your post-retirement savings. 

ü  You have property and estate, wishing to plan and bequeath the same to your beneficiaries.

You are young and have just started a career and will be able to make premium payments for a considerable period.

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Created on Oct 19th 2021 02:14. Viewed 229 times.

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