A Whole Life Insurance policy, as the name implies, covers you for the rest of your life, or until you reach the age of 99 or 100. If you die while the policy is in effect, it will pay the cover amount to your nominee. So you, the life assured, are protected till death. It seems very beneficial to have but the real question is if it is suited for you. In this article, we will present to you the situations where buying whole life insurance will make perfect sense.
You have financial dependents: If your family member relies completely on your income to cover their daily needs or achieve their long-term goals, they are financially dependent on you. Here, it makes complete sense for you to buy a whole life insurance policy to protect them. Or, if you have a family member with a handicap or mental illness who will rely on you financially even beyond retirement, a whole life plan can help you safeguard them.
In such scenarios, it is your job to care for them. You must consider their short- and long-term goals and ensure that they live the life they deserve. A whole life policy, with a suitable sum assured, will provide them with financial support to comfortably spend the rest of their life. How much sum assured will be sufficient for them can easily be determined using the term insurance premium calculator.
If you want to leave a legacy for them: The primary purpose of buying a whole life insurance plan is to provide lifelong financial security for family members. Considering it is a guaranteed payout, Whole Life Insurance is also purchased as an expression, a farewell gift, or a legacy that people want to leave for their family – to ensure that their loved ones have a comfortable life. The proceeds from a Whole Life policy will be tax-exempt inheritance. However, keep in mind that the purpose here is more concerned with safety than with generating efficient returns that exceed the present rate of inflation.
You want to save taxes: If you want to dedicate your money to a safe investment option while also saving on taxes, here is something for you: A Whole Life policy’s premiums and returns are tax deductible, in addition to providing guaranteed lifelong coverage. Under the Income Tax Act of 1961 –
Premiums of up to Rs. 1.5 lakhs are tax free under Section 80C of the Act. Also, payouts to the nominee/policyholder are also tax-exempt under Section 10(10D) of the Act.
You want to create an emergency fund: It is commonly recommended to set up 6-9 months’ worth of expenses in liquid form for use in times of emergency, such as illness or job loss, the right amount which you should save for emergency depends entirely on your needs. One can use the term insurance premium calculator to understand the amount of sum assured it makes sense to leave. While it may be difficult to retain such a huge amount of money, a whole-life plan allows you to accumulate financial worth that can be used later. Whole life insurance allows you to create a cash value fund, it is created using a significant amount of your premiums. It is that portion of the policy that earns interest and can be withdrawn without affecting the death benefits. It serves as a secondary source of revenue for a variety of financial requirements. For example, the money can be used to repay loans, cover post-retirement expenses, and so on. Please keep in mind that the cash value of different policies may vary, so read the policy terms and consult with your insurer or financial counsellor before investing.
Looking for a safe and guaranteed option: If you have a high net worth, have made adequate investments, and are seeking a safe, secure investment opportunity to avoid taxes, a Whole Life plan may be a good fit for you.
You are late to the insurance: If you are one of the late boomers or those who achieve financial success later in life, whole life insurance may be the best life insurance option for you. When you achieve success later in life, your expenses, work life, and even liabilities are likely to last well past the official retirement age.
As a result, it makes sense to extend your life insurance accordingly. However, extending life coverage beyond 60 does not come cheap. While plans with a maturity value are expensive, whole-life term plans are a better choice for several reasons:
So we are saying,
Whether you are starting late or want your life insurance coverage to continue after you retire, whole life insurance is a better option. For example, the plan’s premium payment term is limited to retirement. This ensures that your entire premium is invested while you are employed. At the same time, as a term insurance plan, it provides adequate life coverage for the family. In addition, you can choose to receive all of the premiums you paid for the coverage back upon retirement. However, your life insurance will last until the age of 99. Although the plan has no maturity value, the long tenure ensures that your family receives the funds even if you die naturally.
A Whole Life plan provides you with lifelong coverage and ensures your loved ones’ safety, security, and stability. It is a good option if you have financial dependents or want to accumulate wealth over time to pass down to your heirs. Analyze your needs, and only invest if they match the features of a whole-life policy.
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