Introducing Whole Life Plans

  Author: Naveen Kumar

Unlike most life insurance plans that provide life insurance coverage for a period of time or a term, a whole life plan covers you for your entire life. Most prominent life insurance companies offer these life insurance policies. There are some life insurance players who specialise in these plans. Of course, among life insurance plans, whole life plans are yet to achieve the kind of popularity some other categories of life insurance plans.

Whole life plan basics In whole life policies, you pay premium up to a certain age called the “maturity age” or for a specified period of time. After that, you have the option of encashing your maturity benefits and bonus. Or, you can continue to have your life insurance cover without paying any more premiums.

A whole life plan can be like an endowment plan where your premiums besides providing life insurance are also invested in fixed income investments. As a result, the growth in your investment is moderate and lags behind inflation. You basically receive types of bonus much like endowment plans.

On the other hand, you could also have a whole life plan where the investment part of the premium is used to buy units of a fund your choice. This is like an unit linked insurance plan (Ulip). These funds invest in debt and equity in different proportions. Given the long term of whole life plans, it is seriously worth considering the Ulip variant as over long periods one has a better chance of harnessing the typically high long term growth from equity investments.

Like other life insurance plans, whole life plans get the same tax benefits. You get annual tax deduction of upto Rs 1.5 lakh under Section 80C. The death benefits or maturity benefits are also exempt of tax under Section 10(10)D.

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