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Unlocking Whole Life Insurance in India: Types, Features, and Benefits

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What is a Whole Life Policy

A permanent life insurance policy, also known as whole life insurance, offers coverage for your entire life. The amount of money guaranteed by the policy, called the sum assured, is determined when you buy the policy. This amount is given to the person you choose (the nominee) when you pass away.

Types of Whole Life Insurance Policy

There are 2 types of Whole Life Insurance Policies available in the market. Choose one of these which fulfil your needs.

  • Non-Participating Whole Life Insurance : Life insurance where the policyholder pays fixed premiums, and the insurance company does not share its profits with the policyholders. This means that the policyholder’s benefits and premiums are predetermined and do not depend on the company’s financial performance.
  • Participating Whole Life Insurance: Life insurance in which policyholders receive additional benefits beyond the guaranteed ones. In this type of insurance, the policyholder may receive dividends or bonuses from the insurance company, depending on its profits. These dividends can be used to increase the policy’s cash value, purchase additional coverage, or be taken as cash. Participating policies allow policyholders to share in the company’s success, providing a potential for increased returns compared to non-participating policies.

Features of Whole Life Insurance Policy

  • This is a product that lasts a long time, so the amount of money your loved ones receive if something happens to you increases as you get older, thanks to added bonuses.
  • If something happens to you, all the money your family gets is tax-free according to section 10(10)D. This makes the returns more tax-friendly compared to property, which is taxed for wealth and income after adjusting for inflation.
  • You can choose who gets the money until the day you pass away. This means you can pick someone, like a caregiver in your old age, and even change it later.
  • Nowadays, there are plans that not only give money to your family if you’re not around but also provide a guaranteed monthly income.
  • These plans let you borrow money based on the value they have if you decide to end the plan early.
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Whole Life Insurance: Global and Indian Perspectives

In developed countries, old age homes and hospitals use whole life insurance as a guarantee because the money from the insurance can be used to pay off debts. In these countries, some companies even provide money in advance based on the insurance coverage, allowing elderly individuals to travel around the world for holidays.

In India, every insurance company provides whole life insurance, but not many people choose it because they prefer to have access to money during their lifetime. That’s why more people prefer endowment insurance. However, if we’re building assets to leave a legacy, why not consider creating an asset through insurance.

Benefits of Whole Life Insurance

  • Managing assets involves ongoing costs for supervision and maintenance, but insurance is just a piece of paper that doesn’t require any upkeep.
  • Assets typically come with regular tax implications, but whole life insurance has no such tax concerns.
  • Assets can be stolen, robbed, or seized by the government, but whole life insurance is not vulnerable to these risks.
  • Succession processes for assets are often complicated, whereas the proceeds from insurance are relatively simple.
  • While assets can depreciate, insurance proceeds only tend to appreciate.

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Conclusion

In conclusion, Whole Life Insurance stands out as a reliable choice for long-term financial security, offering simplicity, tax benefits, and flexibility. Globally recognized for its role in guaranteeing financial commitments, its appeal in India is influenced by a preference for immediate access to funds. Nonetheless, the advantages of minimal upkeep costs, tax efficiency, and resilience make it a practical option. Whole Life Insurance emerges not just as a safeguard for loved ones but as a comprehensive financial tool, presenting a valuable opportunity to secure a family’s future and create a lasting legacy.

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