Whole Life Insurance: How It Works and Who Needs It

Life insurance is a critical part of financial planning. It assures you that in the event of your unfortunate and untimely demise, your loved ones will have the financial stability to pursue their ambitions.

Life insurance plans come in many forms. Each type of life insurance serves a different purpose to ascertain your financial security. While plans such as ULIPs, endowment, etc. help you increase your wealth, whole life insurance, term life insurance, and others help guarantee death benefits for your loved ones. Let’s get to know more about these plans.

What is whole life insurance?

A life insurance policy has many variables that affect the terms and conditions. Among them, the most notable are sum assured, premium and Policy tenure. You can purchase life insurance policies with low or high sum assured based on your family’s financial requirements. You need to choose a policy tenure that safely ensures that you live a long and healthy life as well as builds a financial safeguard for your loved ones.

A whole life insurance policy is one where the policy tenure extends to your entire life span. Regardless of whether you live for 10 years or 100 years after purchasing a whole life insurance, in the event of your death, the insurer will pay the death benefit to your beneficiaries. These types of policies ensure your entire lifetime.

Whole life insurance plans are available in two forms of purchase. You can either purchase a whole life insurance policy from the varying options available under life insurance. Or you can convert a term insurance plan into a whole life insurance. Based on your current finances and an estimation of your loved ones’ future financial needs, you can choose the option that suits you best.

Who needs whole life insurance policies?

Whole life insurance plans ensure your entire lifetime. It is difficult to estimate whether or not you will survive the policy tenure. Therefore, whole life insurance plans are not viable if you are looking for a saving solution with maturity benefits. These are best suited if you wish to secure the financial future of your loved ones.

If you lead a healthy lifestyle with minimum vices and have a good medical report while purchasing the policy, whole life insurance is worth considering. Whole life insurance is available as endowment plans and unit-linked insurance plans, thus assisting in building your wealth while securing your whole life under the policy. This innate nature of building wealth and safeguarding the future of your loved ones makes whole life insurance a viable option for everyone.

Term insurance vs whole life insurance

Term insurance plans are those that you can purchase for very low rates of premium. The policy tenure for these plans is flexible, so you can insure yourself for 10-100 years and opt for very high sum assured. However, when you choose a 100-year term plan, it is essentially a whole life insurance policy.

Term insurance vs whole life insurance is an age-old debate when choosing the right plan for you. Here are some tips to help you decide which one you need:

1. Term life insurance is available as multiple options such as increasing term plan, decreasing term plan, level term plan, single premium term plan, and term insurance with return of premium.
   Whole life insurance is available in distinct types as well, including endowment plans and ULIPs.
2. Increasing term plans helps increase the sum assured annually, whereas decreasing term plans helps you systematically settle liabilities.
   Endowment plans help earn bonuses, whereas Unit-Linked Insurance Plans let you invest money in the unit-linked market to earn profits.
   In terms of wealth benefits, term insurance vs whole life insurance both offer viable options.
3. Term plans can be converted to whole life insurance, but whole life insurance cannot be converted to term plans.
4. Another important aspect of term insurance vs whole life insurance is the premium. For term insurance, the premiums are relatively lower, whereas for whole life insurance, the premiums are higher due to guaranteed tenure and options to earn more money from premium investments.

When considering term insurance vs whole life insurance, you need to determine the sum assured that your loved one’s need. You also need to factor in the rate of inflation that would be levied on the value of the death benefit. While increasing term plans eventually can beat inflation, whole life insurance plans allow you to grow your wealth in real-time.

Furthermore, the choice between term insurance vs whole life insurance also depends on your health and lifestyle. A whole life insurance policy is better suited if you hope to live a long life. A term plan, on the other hand, is handier if you want a policy with a shorter tenure but a higher sum assured. Both plans are beneficial, but you need to choose the one that best suits you.

Also visit Digital Global Times for more quality informative content.