Insurance policies are mainly of two variants, term insurance and whole life insurance.
Term insurance provides life cover to the insured for a specific tenure; in case the insured survives the tenure, no payment is made.
In contrast, whole life insurance policy provides life cover till the insured expires or till s/he is 100 years old, whichever is earlier.
Pros of Whole life policy –
• Premium payable is stable throughout the tenure
• Pays as well as protects
• Enables you to create an inheritance for your loved ones
• Add-on and riders are available to customize coverage
• Premium paid for life insurance qualifies under section 80C for tax exemption
• Helps meet financial needs by providing loan against the maturity value
• Enables you to surrender the policy prematurely, the maturity value as on that day is paid after some minor deductions
• Most insurers allow you to continue availing policy benefits even after discontinuing premium payment till the policy is surrendered
• Whole life policy comes with a dividend payment option
Cons of whole life policy –
• Premiums are generally high
• Greater chances of being under insured
• Not the best investment option available in the market
• Most investors are cautious of bundled options like whole life insurance mixing insurance with investment
• Majority of investors are wary of availing a life cover post retirement when their beneficiaries no longer dependent on them
Whole life policies are beneficial for young individuals as they can benefit from affordable premiums; as well as potential policy owners seeking security of guaranteed returns, in case of death and survival both.
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