Insurance

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.

Whole of Life Assurance
As the name suggests, the whole life insurance policies are intended to provide Life Insurance protection over one's lifetime. The essence of whole life insurance is that it provides for payment of the assured amount upon the insured's death regardless of when it occurs. Under these policies, the payment of the assured sum is a certainty in contrast to the term insurance contracts. Only the time of payment of the assured sum is an uncertainty. A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component pays a stated amount upon death of the insured. The investment component accumulates a cash value that the policyholder can withdraw or borrow against.

Whole life policies can be either participating type or non-participating type. Participating type policies are those which are entitled to a share in the distributable surplus (profits) of the Life Insurance company, whereby the cash value of the policy can go up, with the announcement of bonus / dividend. Non-participating policies have the same benefit throughout the life of the policy. There is no fixed end date for the policy, as there is with term life insurance. When the policy holder dies, the face value of the policy, known as a death benefit, is paid to the person or persons named in the life insurance policy (the beneficiary or beneficiaries). The cost of a whole life insurance policy is spread out across many years, so the premium remains the same. This ensures that older people on a fixed income will not have to cope with rising premiums. Unlike term life insurance, whole life insurance accrues cash value over time. If you cancel the policy after a certain amount of time has passed, the insurance company will surrender the cash value to you. The cash value is scheduled to equal the face value when the policyholder reaches the age of 100. If you live that long, the insurance company will likely pay the face value to you in a lump sum. This is not the only way to use the cash value, however. You can also borrow some of the cash value as a loan. The money has to be paid back, but there is no approval process and no risk of being turned down. You are your own lender. Some whole life insurance pays dividends, so it can be used to supplement your retirement income.

The premiums are like the level life insurance plans. the policy no longer remains a whole life insurance policy. The vested bonus / units additions would be altered to an amount which the policy would have earned had it been effected from the . Limited Payment Whole Life Insurance 3. the death benefit remains the same throughout the coverage period. It is called "ordinary" because the premiums remain "level. Convertible Whole Life Insurance This is a whole life insurance policy which gives its holder an option to get it converted at the end of five years. However. in to an endowment policy. term life insurance policies provide protection for a specified term of one or more years. but they are more than an average straight life insurance policy's premiums would be. the premium is suitably increased. and interest thereon. The policy is designed to meet the needs of the young man who is on the threshold of his career and has prospect for increase in income after a short period. Payments are scheduled to end after a limited period. if it is not exercised the policy continues to be. no difference in premiums for the previous five years. a whole life insurance policy. If the option is not exercised. and the policy extends until the insured reaches age 100. Like the straight life insurance. However. they are the same during the premium payment period.There can be the following types of whole life policies 1." unchanged for the life of the insured. from the time of the policy's purchase until the death of the insured. the policy continues as a whole life assurance with premium ceasing at age 70. The cash value in the savings component increases more during the payment period as the protection component decreases. The object is to provide maximum insurance protection at a minimum cost and at the same time to offer a flexible contract which can be allowed to an endowment policy at the end of five years of the policy. Limited Payment Whole Life Insurance Limited payment insurance is a special kind of whole life policy that provides coverage for the policyholder's whole life. different than a straight life insurance plan is that these plans can allow the payment of premiums over a period that is shorter than the actual duration of the coverage of the plan. If this option is exercised. Convertible Whole Life Insurance Ordinary Whole Life Insurance Ordinary life insurance provides insurance protection for the "whole life" of the insured. Other whole life policies can have flexible premium payment options different from ordinary life policies. will be charged and he is not required to go under fresh medical examination. that is. If the policy is converted in to endowment. Ordinary Whole Life Insurance 2. in a limited payment life insurance policy. In contrast.

your chances of dying increases. When interest is earned and added to your cash value. But the key here is that they are guaranteed. pay dividends. Advantages of Whole Life Insurance  Premium Cost is Guaranteed A key advantage of whole life insurance is that the cost of the premiums paid to the policy will never increase.  Cash Value Grows Tax-Advantaged With a whole life insurance policy. also referred to as dividend paying. there are strategies to get all of your money out.However. the insurance company looks at how efficient it was with your policy. you are paying the premiums with inflated rupees. which is one of our strategies to save money. The cash value grows without taxation. the key thing here is that these dividends aren't taxed. they increase the cost of premiums. the cost will never change. Your cash value and death benefit can never decrease in value unless you start withdrawing the cash value from the policy. TAX FREE!  Policy Pays a Dividend Whole life insurance policies. It's guaranteed. Since the life insurance company takes on that risk. it's guaranteed. What's one of the eroding factors of money? Inflation.commencement as an endowment policy and further. it's guaranteed. You are only taxed after your withdrawals from the policy exceed your basis (the total amount that you put into the policy). At the end of the year. With whole life insurance. When you pay your premium and your cash value increases. which means that the premiums get cheaper and cheaper.  Bonus Advantages of Whole Life Insurance As the years go by. Whole life insurance policy acts as a savings account. you pay the premiums with after-tax . Let's say they earned 10% on your policy .  Premium Consists of Guaranteed "Cash Value" and Death Benefit The premiums paid go towards increasing the cash value AND death benefit. Even if you are gravely ill. and the gains. the policy would thereafter be entitled to bonus or increasing units at the rate applicable to endowment assurance. For example. Now. As time progresses. your rates will rise over time. let's say that you pay Rs1000 into the policy. The reason why this is important is because with term policies. This is due to the changes in your health and age. permanent insurance policies. The time value of money will be working. the premium cost will stay the same as long as the policy is in force. the policy actually gets cheaper. As you get older. The same applies to your death benefit. They are actually considered returns of premium.

. you have no obligation to pay the principal back. a dividend paid to your policy does not lose value.What some people don't realize is that the money inside a whole life insurance policy is protected as well.This advantage of whole life insurance will help you fight inflation. You have the option of having those dividends purchase additional paid-up insurance. Those rupees will buy more life insurance. you can make those rupees work even harder for you. We have encouraged our readers to protect their assets. It is a return of premium.  Cash Value Can Be Used as Collateral Banks will accept the cash value within the policy as collateral.  Cash Value is Exempt from Creditors This is very important.Or. If you carry that loan balance to your death. creditors can't touch the money in your policies. You have extra rupees growing your cash value and earning additional interest.(Rs100). They can send you a check. and earn interest.Adding this rider to your policy is another advantage to whole life insurance. which is not considered a taxable event. they decide to return Rs90 back to you (the Rs10 pays for administration fees and a contingency fund). It's the closest to wealth without risk you can get. you. This tax saving tip is widely unknown. provide a bigger death benefit. life insurance protects the most important asset. You are no longer required to pay the premiums.  Can Borrow From Your Policy Best of all. You transfer risk away from you to somewhere else. After deliberation. Unlike your car and boat. It's value is guaranteed because now it's part of the cash value. In the event you become disabled. The death benefit is in place to replace your Human Life Value in the event of your death. this rider has the insurance company continue the premium payments for you.  Option to Have the Insurance Company Pay Premiums if You Become Disabled You can take advantage of a disability rider on the policy. the principal will be deducted from your death benefit.  Provides Wide Flexibility You have the ability to do something special with the dividends. In the event that you are sued. no questions asked. Of course. this collateral is appreciating. You can have the dividends paid directly to you.And. This is not an actual gain.

 Inflexible premiums. Although a bonus. Some people take out coverage because of the investment element. It is better to invest any surplus funds directly into equities and mutual funds as the returns are better historically. There isn't any scope to make changes to take into account a change of personal circumstances or the need for a larger tax-free lump sum payment. A universal life insurance policy may offer an improved investment performance. List of top Insurance Companies in India providing Whole Life Insurance Life Insurance Corporation of India Bajaj Allianz Tata AIG Life Birla Sun Life Insurance SBI Life Max New York Life Kotak Life Insurance HDFC Standard Life Reliance Life ICICI Prudential . the cost of a whole life policy will also go up. This means that it is necessary to pay extra in order that more of the money can be invested to pay for mortality protection and the eventual lump sum payment. As the likelihood of death rises exponentially with age.  Wrong policy.  Investments.Disadvantages of Whole Life Insurance  High premiums. it isn't the primary reason for taking out a policy. The money is invested by a professional so there is little scope for optimising performance.

Sign up to vote on this title
UsefulNot useful