As the name suggests, a Whole Life Insurance policy covers you for your whole life, i.e., till you are 99 to 100 years old. It will pay your nominee the cover amount in case you, unfortunately, pass away during the policy term. What’s more? Well, it also pays you a Maturity Amount - if you survive the tenure.
So you, the life assured -
Whole Life is like a simple and beneficial life insurance plan, but the main question is - is it right for you?
We bring you 5 situations where investing in a Whole Life policy makes perfect sense -
You have Financial Dependents
If any family member solely depends on your income to meet their daily expenses or future goals - they are financially dependent on you. And you should buy a whole life plan to keep them secured. Or if there is a person with a disability or mental illness in your family, who is going to be financially reliant on you even after retirement - a whole life plan will help you protect them throughout.
For instance, if your spouse is financially dependent on you, it becomes your responsibility to take care of them. You need to look out for their short-term and long-term goals and make sure they get the quality life they deserve. A whole life policy - with an adequate cover amount - compensates for your income and lets your partner comfortably run the family - in case you are not around anymore.
You Want To Leave Behind A Legacy
The basic goal of a Whole Life Insurance policy is to ensure lifelong financial protection for family members. Given that it is a guaranteed payout, Whole Life Insurance is also bought as an expression, a farewell present or a legacy that people want to leave behind for their family - to ensure their loved ones live a comfortable life.
The sum generated out of a Whole Life policy will be a tax-exempted inheritance. But remember, the goal here is largely focused on safety than efficient returns that beat the current rate of inflation.
For example, Sejal, 47-year-old, has already invested heavily in stocks and gold bonds. She now wants to build a safe, tax-free fund to leave behind a legacy - so that her husband and children can live a stress-free life. In this situation, Sejal can consider buying a Whole Life policy, as cash acts like a good asset that can be managed easily.
You Want To Save Taxes
If you want to allocate your money to a safe investment option and also save on taxes, here’s something for you -
Along with guaranteed life-long coverage, the premiums paid and the returns received in a Whole Life policy are eligible for tax benefits. Under the Income Tax Act, 1961 -
You Want To Build An Emergency Fund
It’s usually advised to keep aside 6-9 months of expenses in liquid form to be availed in times of emergency, such as illness or job loss. While it may not be easy to maintain such a large repository of money, a whole-life plan helps you accumulate a cash value that can be utilised later.
A cash value is a fund that is built by a substantial portion of your premiums. It is a portion of the policy that earns interest and will be available for you to withdraw - without affecting the death benefit. It, thus, acts as a secondary source of income for various financial needs. For instance, the money can be used to pay off loans, post-retirement expenses, etc.
Please note: The cash value may differ across policies, so it is prudent to go through the policy wording and check with your insurer or financial advisor before investing in the policy.
For instance, Raghav, a 35-year-old male, bought a whole life plan in 2015, which has accumulated a cash value over the years and will continue doing so. His mother suffers from osteoarthritis and she has to undergo joint replacement surgery in 2022. With the whole life plan in place, Raghav can withdraw the accrued cash value to pay off the medical bills, as and when needed.
You Are A Wealthy Person
If you have a high net worth, have made enough investments, and are now looking for a safe, secure investment opportunity to save taxes - a Whole Life plan can be a good option for you.
A Whole Life plan gives you life-long coverage and your loved ones a safe, secure, and stable future. It is a good option if you have financial dependents, or want to build wealth over time and pass it to your heirs. Analyse your needs, and only if they align with the features of a whole life policy, consider investing in it. We hope you make a good decision.