A Whole Life Insurance Plan is basically a Term Plan with unlimited term. Thus, it is also a pure protection plan like a Term Plan, where the nominee gets the Death Benefit on the death of the Life Insured and there is no Maturity Benefit. The basic difference between the two plans is that in Whole Life Plans, the nominee gets the money whenever the life insured dies till the age of 99 years whereas in Term Plan, the nominee would get the death benefit only if the Life Insured dies within the policy term and nothing is payable beyond that period. Thus a Whole Life Plan is another version of a Term Plan where the policy term is unlimited.
The Sum Assured is paid on death whenever it may occur. i.e. coverage for whole life. Usually the term is considered as 99 years, as human mortality is less than that. In some policies, if the life assured reaches the age of 99, then sum assured is paid as Survival Benefit.
Insurance Premium would usually consist of 3 parts, namely Mortality Charge, Administrative Expenses and the rest is Investment. Mortality Charge is the charge paid to the insurance company by the policyholder for providing him with the assurance of the Death Benefit. Expenses are administrative costs for documentation, etc. and the remaining amount is invested for providing the Maturity Benefit, if any, to the customer.
Since there is no Maturity Benefit whatsoever in Whole Life Plan, there is also no requirement for Investment. However, it is a more expensive plan than pure Term Plans because the death benefit definitely needs to be paid whenever the life insured dies. In pure Term Plans, if the life insured survives the entire tenure, nothing is payable to him.
Whole Life policies can be with or without profit or bonus. It means participating Whole Life Plans have a bonus factor attached to it, but non-participating plans do not give bonus of any form.
Who should buy this Whole Life Insurance Plans?
The usual customers for this plan would be someone who is the only earning member of the family and has a number of dependents and would like to cover them for his complete life span. It is also beneficial for a high net worth individuals who needs a very high cover himself and would like to protect his children’s future by taking a life cover.