Ch. 24: Whole Life Term Insurance

A pure term insurance policy will offer a payout only if you pass away while the policy is active. If you outlive the term - you don’t get anything back. If you’re someone who is not happy with such a proposition or if you don’t want to make an investment that doesn’t pay anything back, you can consider buying a Whole Life Term Insurance Plan.

What is a Whole Life Term Insurance Plan? How does it work? Should you invest in it?

Let’s find out!

Just like the name suggests, a whole life term insurance policy covers you for practically your entire life. These plans offer coverage for up to 99/100 years of your age.

How Does A Whole Life Term Plan Work?

Whole life term insurance plans work similarly to a pure term insurance plan -

• If you pass away while the policy is active, your family will receive the claim.
• In case you survive the policy term, you won’t get any payback.

Here are a few benefits of buying a Whole Life Term Insurance Plan -

Lifelong Protection
Other types of term insurance plans provide coverage only for a fixed period of time. However, a whole life term insurance policy will cover you for 99/100 years of your age, i.e., essentially your whole life until you pass away. As it is less likely that you’ll survive such a long term, a Whole Life Term Insurance Plan is a sure-shot way of leaving a financial legacy for your loved ones.

Death Benefit
If you pass away while the Whole Life Term Insurance Policy is active, your nominee will receive a death benefit. This death benefit will include the total sum assured you opted for at the time of purchasing the plan.

Tax Benefits
The premiums you pay under a Whole Life Term Insurance Plan are exempted from tax under Section 80C of the Income Tax Act, 1961. And, the death benefit your nominee will receive is also exempted from taxation under Section 10(10D).

You should consider investing in a Whole Life Term Insurance Policy if -

You have financial dependents beyond your retirement
A financial dependent includes any person who relies on your earnings, for their expenses and lifestyle - both in the short as well as the long term. Some examples of financial dependents include your spouse, children, parents, siblings, etc.

If you have financial dependents who rely on you for their financial needs for a long period or possibly your entire lifetime, then you need to invest in a Whole Life Term Insurance Plan. Why? So that in case of your untimely demise, your dependents will have financial protection.

You want to leave a financial legacy for your loved ones
Many people often look at a Whole Life Term Insurance Plan as a product to offer a financial legacy to loved ones - a product that can help leave behind something for the family as a token of love.

The main purpose of purchasing a Whole Life Term Plan is mostly to ensure a secure tax-free corpus for loved ones, with a greater emphasis on safety than on effective returns that outperform the current rate of inflation.

And as we read above, the payout received from a Whole Life Term Plan is exempted from tax under Section 10(10D) of the Income Tax Act, 1961. So, you can consider investing in Whole Life Term Insurance if you wish to leave a tax-free legacy for your family members.

A whole life term insurance policy provides coverage for a duration of 99/100 years of your age. You can consider investing in this plan if you have a possibility of financial dependents beyond your retirement or if you want to leave a financial legacy for your loved ones. As it is less likely that you'll survive till 99/100 years of age, there’s a high possibility that your family will get an assured payback. Of course, there is the catch that if you survive the policy duration, you won’t be paid anything. But, you won’t complain about a remarkably long life!