Life insurance is a legal contract between an insurance policyholder and an insurance company. In exchange for a premium, the insurance company vows to pay a certain amount of money when the insured person passes away or after a certain amount of time. The money from your life insurance policy can help pay for your funeral and other costs after you breathe your last. This could include costs for a funeral or cremation, medical bills that aren’t covered by health insurance, costs for settling an estate, and other bills that haven’t been paid. There are many different kinds of life insurance on the market. Three common ones are:
- Term life insurance
- Whole Life Insurance
- Universal life insurance
In this article, we will talk about whole life insurance.
A whole life insurance policy is a life insurance plan that not only covers the policyholder for as long as they live but also helps them save up money that they can use when the policy matures. The money saved can be used to reach many different personal financial goals.
Benefits of buying a whole life cover:
Before choosing a whole life insurance plan, it’s essential to know all its benefits. Here are five of the best things about a whole life insurance policy.
1. Offers life insurance
If the policyholder passes away, the family may undergo financial troubles, especially if the policyholder were the primary breadwinner for the family. With a whole life insurance plan, the nominees are paid out the amount promised which can help replace the policyholder’s income.
2. Provides a disciplined way to save money
Your whole life insurance plan’s premiums can be paid either monthly, quarterly, semi-annually, or annually, depending on what your policy says. This makes it easy for you to save money regularly. If you pay your premiums on time, you’ll get a lump sum when the policy matures, which you can use in case of an emergency.
3. Gives a bonus
An annual bonus is part of a whole life insurance plan. This amount is given as a share of the amount guaranteed. Suppose the policyholder passes away during the policy period, the nominee(s) will get the sum assured plus all of the bonuses that have been earned.
4. Helps to meet various life goals
Since whole life insurance plans give you the money you’ve saved up at maturity depending on your policy, you may be able to use it to achieve your own long-term goals.
5. Offers tax benefits
Getting a tax break is one of the best reasons to buy a whole life insurance policy. Section 80C of the Income Tax Act of 1961 lets you get a tax break on the premiums you pay for your policy. Section 10D also says that there is no tax on the amount of the death benefit.
*However, taxes are subject to change. It may vary depending on whether you follow the old or new tax regime.
Whole life insurance policies are suitable options that can give you financial security now and in the future.
Now, based on your situations, you should give your decision of buying whole life insurance a little more thought. While whole life insurance is extremely beneficial, here are some factors that you should look at before making a decision:
You only need life insurance for a specific certain amount of time, say maybe 10, 20 or 30 years.
You can bear high risks on investment. Not everybody wants to have a low risk portfolio or are always looking for a safe, guaranteed way to build cash value.
You want control over your money. You might not be interested in something that offers a fixed rate of return on cash value, with zero investment choices. This can happen if you want to benefit from the potential highs of the stock market.
You’re want to benefit from a higher rate of return. The interest and dividends you can get with a whole life policy, at times, may not match your expectations.
There is no shortage of different types of life insurance policies, including whole life insurance. Do your research well before you make a decision.