It is natural to want to work hard and do everything in your capacity to help your family live comfortably. However, as the primary earner, have you ever thought about who would take care of them and provide for them after you? Thinking about how your family is going to manage their expenses, lifestyle, and other activities in your absence can be heart-breaking. However, it is hard for them to cope emotionally; planning financial assistance for them beforehand can help them financially.
Here comes whole life insurance. Using the benefits of whole life insurance, you ensure your spouse is financially independent, your kids continue studying without any financial hurdles, and your loved ones can live a quality life.
What is whole life insurance?
Whole life insurance is considered to be a type of permanent life insurance. This often means there is no expiry involved here, and these insurance plans offer life-long coverage, typically up to 99/ 100 years of age. The only thing you need to do is to not miss your premiums or cancel your policy. In return, you get the death benefit.
Whole life insurance is designed to support and provide a financial cushion to your loved ones in case of your unexpected demise. The beneficiaries get financial help, which can be used to clear off debts and do much more.
However, a lot of people seem to be confused about what to choose: term life insurance vs whole life insurance. When it comes to term insurance vs whole life insurance, it is important to understand the former ends at a fixed pre-set period or age limit. Here, you might need to buy a new policy to continue your protection. The latter offers lifelong coverage with no expiry, given that your premiums are kept being paid.
Key benefits of having a whole life insurance
Having a whole life insurance helps individuals in several ways. Death benefits are just one of them. Here are some compelling benefits of having this insurance.
- You enjoy fixed premiums
With whole life insurance, your premiums are predictable, so you simply need to choose an insurance for which you may easily pay regular premiums.
2. You build a cash value
One of the best parts about whole life insurance is that it allows you to build a cash value component. The same keeps growing over time and can be used for borrowing against the policy, managing your other financial requirements, etc. You get to leave behind a legacy for your loved ones.
3. Guaranteed Death Benefit
With whole life insurance, you enjoy a guaranteed death benefit. Irrespective of market fluctuations or varying inflation, you can rest assured that your family will receive an assured amount if something happens to you.
4. Tax Benefits
With whole life insurance, the policyholder may enjoy tax-free loans or withdrawals from the cash value portion of the policy. Additionally, the death benefit offered to the beneficiaries is also tax-free. Further, using section 80C of the Income Tax Act, 1961, you may also claim tax deductions of up to ₹1.5 lakh every year for the premiums paid on the policy.
Is whole life insurance a smart portfolio investment?
Having a whole life insurance can serve you in different ways. These also act as assets. The best and easiest way to understand the same is by looking at the cash value component. You may simply understand it as insurance that also gives you the benefits of a savings account. You keep accumulating a certain amount of cash that can be used to deal with unexpected circumstances.
Here is how you may make the most of your whole life insurance policies.
- Use it to take a loan
As mentioned earlier, typically, you can also apply for or avail of loans on the cash value component of your policy. The rates of interest can vary or be fixed as per the insurer’s style.
2. It can be used as a collateral
Your whole life insurance can also be used as collateral for loan applications. Thus giving you a better shot of getting your loan sanctioned without much hassle.
3. It can be used for fund withdrawal
With loans taken on cash value, you need to pay them back. However, you also make simple withdrawals that need no repayment and are completely yours.
Wrapping up
Getting whole life insurance offers several benefits. However, it has its own set of advantages and disadvantages. You enjoy perks like fixed premiums, cash value, guaranteed death benefit, and much more. However, you should be aware of its cons, such as these being comparatively expensive and the growth of cash value being comparatively slower and limited. Comparing these pros and cons can help you make an informed decision. Further, make sure your policy aligns with your financial goals and budget.