Whole Life Policy
What is Whole Life Policy?
A typical whole life policy runs as long as the policyholder is alive. In other words, the risk is covered for the entire life of the policyholder, which is why they are know as whole life policies.
The policy monies and the bonus are payable only to the nominee of the beneficiary upon the death of the policyholder. The policyholder is not entitled to any money during his or her own lifetime, i.e. there is no survival benefit.
This represents a serious drawback in the case of whole life policies. Suppose, for instance, you buy a whole life policy at the age of thirty when your children are young and the family needs protection. Conceivable, by the time you are 55 or 60 or so the children may be well settled, no longer truly needing the protection the whole life policy provides. On the other hand, you would probably require the money for yourself and your wife in your retired life but this would not be possible since the sum assured is payable only when the policy holder dies.
In this sense whole life policies are fairly rigid and inflexible and are suitable only in a few, very specific cases.
However, given the rigidity pointed out above we would advise you to be careful about buying a whole life policy when you are young. Your insurance portfolio is best built around endowment policy. The one exception is the Convertible Whole Life Policy.
On the whole, whole life policies may be best considered after the age of 45 either for the purpose of leaving behind an estate for one’s heirs or for covering the possibility of premature stoppage of pension income in the case of relatively early death after retirement.
How is it beneficial to me?
Whole Life Policy can be a good initial policy to buy since its cost is very low. That is an important consideration when one is just starting a career.
Who Should buy this Plan?
- This is particularly beneficial for those who are eligible for a sizable pension during their retired life, a whole life policy can be very useful in covering the risk of death taking place - and, therefore the pension coming to an end - soon after retirement. In such a case a whole life policy serves as financial compensation to the family for the early loss of pension.
A whole life policy will also come in handy for those who wish to create an estate either for their heirs or for donating to charity after their death. The ideal age to consider a whole life policy for such a purpose is around your 50th year. By then one would have provided for the maintenance of one’s family, education and marriage of one’s children, etc., as also for one’s own old age. This is the time for one to consider leaving something behind for one’s heirs.