A whole life insurance policy covers your life for your entire life. It provides dual benefit covering life coverage and bonus. The premium is for 10-15 years and the insurance cover is for the entire insured life. In case, you plan for a certain sum assured and stop after paying for some 15 years, the coverage will last for entire life and this is because the premium is high.
The life insurance policy offers insurance coverage for the entire life to the policyholder. In case of the policyholder’s death, the insurance payout is given to the nominee as it is loaded with features:
- Life protection
- Ensured premium
- Death benefits
- Annual bonus
- Loan to be availed
- Tax benefits
Types of whole life insurance policy
The policies of whole life may be divided into following heads:
- Pure whole life insurance: In this the premiums are paid through life till the death of the insured. Risk coverage is for the complete duration and the sum assured is paid only after the policy holder death.
- Limited Payment whole life insurance: There is limited premiums payable and for a short period of time. The risk coverage is given for the insured’s entire life.
The maturity proceeds vary between places. Some plans provide recurring bonus or terminal bonus or some may provide both. The plans come with different premium payment options such as single, limited and regular.
How whole life insurance policy works?
The insured is expected to pay a premium every year. A portion of this premium is used for protection and remaining is invested in companies. In case, profit is earned with the investment, a policyholder gets bonus on the investment. This investment doubles in value and is given to the policy holder, if he wishes to live or withdraw till the maturity plan. Precisely, whole life plans provide entire life security, thus build a corpus. It is ideal to include this feature in your investment portfolio.
Pros and Cons of whole life insurance
There are several reasons to consider buying whole life insurance.
- It is simple to understand
- Payments for every month are the same
- Whole life policies may be paid for few years and so he earns a rate of interest. It is simple to predict the cash growth.
Whole life insurance is a design for the long-term, so prior to buying, be sure to think about making premium payments consistently for the life of the policy. However, whole life insurance is not much flexible, so it is not easy to customize it. Yet, whole life insurance is a good option, if it is predictable and dependable.
The insurance needs keeps changing with the changes in your life. You should weigh the associated costs while buying. Life insurance has charges and fees including insurance cost and this vary based on the gender, age and health of a person.
Whole life insurance is also referred to as cash value insurance. It is a consistent life insurance that remains in effect at a premium level. It is a good choice that does not diminish over time. In this insurance policy, a premium portion goes for a reserve fund and it builds up over years. The reserve fund is tax deferred and you can always borrow against it or also withdraw.
Generally, the premiums remain constant for the policy term and must be periodically paid as per the policy indicated amount. You also can pay as a single premium as a lump sum. It will grow equalizing the death benefit amount as you turn 100 years.
Whole life insurance is expensive, when you are on limited budget. But, the added advantage is that the death benefit is assured when the premiums are paid. It will never decrease, in case you do not borrow. The returns of this policy fluctuates the market.
Buying whole life insurance must be done carefully choosing the coverage level. Before buying, be careful and ensure a guaranteed cash value is done and also consider participating insurance policies that can boost the cash value and pay dividends. In case you stop the premiums payment, your policy allows using the accumulated cash value, thus your coverage current is retained.
So, after getting answer to the question- is life insurance a good investment and after understanding whole life insurance do buy one insurance policy for you and your family.
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