What is a Whole Life Insurance Plan?

What is a Whole Life Insurance Plan?

A whole life insurance plan is a type of insurance agreement. This plan offers financial security to the consumer for a lifetime. For this, the consumer pays the amount which is a premium. The plan offers financial safety as long as the consumer pays the premium. In case of the death of the consumer, the nominee shall be helped from the plan. A whole insurance plan is also a type of permanent life insurance policy. It offers protection for a lifetime. 

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Benefits of a Whole Life Insurance Plan

Here are the benefits of the whole life insurance plan in India. 

Lifelong Protection

The whole life insurance plan provides coverage for the entire life of the consumer. It protects the consumer and his family against unexpected events. It is a great plan for the individual who has a family. 

Saving 

A whole life insurance plan offers the chance for saving. The policy offers a fixed rate of return on the shares of the consumer. So, it is a great choice for the individual who wishes to have a safe investment of his money. 

Tax Benefits

A whole life insurance plan offers a tax benefit to the consumer. The insured person may have the tax benefit under section 80C of the Income Tax Act. The premium that a consumer pays is allowed for a tax deduction. This helps the consumer to reduce the taxable income. 

Loan Against Policy

The consumer may use the whole life insurance plan for collateral loans. It helps avoid financial issues.

Types of Whole Life Policy

The insurance companies offer different kinds of whole life insurance plans. Every plan fulfills the specific needs of consumers. Therefore, a consumer must understand each kind of plan to understand which plan can suit his needs. 

Non-Participating Whole Life Insurance Policy

The non-participating whole life insurance plan offers a fixed benefit to the consumer. It does not provide any extra earnings to the consumer. In addition, the whole life insurance plan does not share profits with the investors. The premium under a non-participating whole life insurance policy is very low. This is because it does not invest the profits in a non-participating program. 

Participating Whole Life Insurance Policy

The participating whole life insurance policy pays dividends to its investors. The insurance company raises dividends from the profits it makes. Later, the company distributes it among the investors. However, it does not guarantee the dividends. It depends on the performance of the company throughout the year. For example, the insurance company can distribute dividends if it makes an extra profit. The consumer shall not receive any dividends if it faces loss during the financial year. 

Level Payment

The premium under the level payment remains the same throughout the duration or term of the policy. The consumer pays a certain amount of premium on a monthly or yearly basis. Many consumers invest in level payments due to unchanged premiums. The level payment is a common kind of payment plan.

Single Premium

As the name suggests, the consumer pays a large sum for one time as the premium of the plan. The consumer pays a single premium under the single premium plan. The insurance company invests the sum or premium paid by the consumer. However, this kind of policy is a modified endowment contract. Hence, it may have tax consequences. 

Limited Payment

Under this plan, the consumer pays the premium for a limited period of time. However, due to the limitation, the premium shall be higher than other plans. 

Modified Whole Life Insurance Plan 

This plan is more expensive than other policies. The consumer pays more premium in the initial years. Later, he increases the premium amount as per the terms. Therefore, this is an expansive plan in the long run. 

Conclusion

Whole life is a long-term insurance plan. It offers financial protection for a lifetime. The consumer pays the premium regularly. This is done to earn more interest. The consumer may name a person as the nominee. The nominee receives the amount if the consumer dies before maturity. The insurance company offers many kinds of insurance plans. This includes single premium and limited premium. Modified whole life is also a type of whole life insurance plan. The consumer must understand every plan.  Later, he should choose the best one.

FAQs

Q. What is the death benefit in the whole life insurance policy?

A. The death benefit is the maturity amount. The plan allows the consumer to choose the nominee. He can choose his wife or children as the nominee. The nominee receives the death benefits when the consumer dies. 

Q. Is death benefit tax-free?

A. Yes, the death benefit is tax-free. The nominee receives this amount. It gives the nominee financial independence.  

Q. What are the types of whole life insurance policies?

A. Here are the types of whole life insurance policies. 

  • Level Payment
  • Single Payment
  • Limited Payment
  • Modified whole life insurance policy
Q. What is a single payment?

A. The consumer pays a one-time premium under a single payment. This premium shall be invested in the whole life insurance plan. 

Q. What is a unit-linked whole life insurance plan?

A. A unit-linked whole life insurance is an insurance cum investment plan. Under this plan, the premium paid by the consumer shall be invested in the life insurance and investment fund.

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