What Is A Whole Life Insurance Policy
Whole Life Insurance Policy is an insurance policy which protects the insured’s entire life, provided the premiums pertaining to the policy agreement are paid. The whole life insurance policy is also called as ‘ Straight Life Policy ‘. A maturity date is also a component of the whole life insurance policy. The maturity date is the date till when the premiums are to be paid. The agenda of the whole life insurance policy is that the near and dear of the insured are secured financially in case of the sudden demise of the insured. The policy amount which is received in the event of the death of the insured is tax-free to the recipients of the money. The tax-free element is one of the key elements of the whole insurance policy. A whole life insurance policy can be taken either on monthly or yearly payment basis.
You can also avail a unit-linked insurance policy, in which, your payment of premiums towards the insurance is partly for the risk element and partly is invested in a mutual fund or a similar investment avenue. This type of whole life insurance policy has become very popular and is the most preferred by the policymakers. The investment component builds over time as a source of cash for the insured, such that, the insured can borrow money against it.
There are two broad categories of whole life insurance policies
-Non-Participating Whole Life Insurance
This policy has a fixed premium amount and is just like any other ordinary insurance policy. The fixed and pre-decided element of the insurance policy is its benefit and is suitable for the people who are uninterested in any attached benefits or alteration in the premium amount.
-Participating Whole Life Insurance
The main distinguishing feature of this policy is that it offers dividends to the policyholders. This dividend is nothing but an accumulation of their investment which they can borrow later at a low-interest rate. The dividend payment aspect is not compulsory. Also, if the dividends are paid in cash, the policyholder may use it in paying his premium.