What  is whole life policy

Whole life insurance policies are very similar to term insurance plans. This is a term plan with an unlimited term. As the name suggests, a whole life policy is an insurance cover against death, where the sum assured is payable only on death, whenever it may occur.

Under this plan, the policyholder pays regular premiums until his death (till a claim arises), following which the payment is made to the nominee or the claimant. Although, in the case of Whole Life policies, the sum assured is payable only on death, many insurance companies pay the sum assured, when the life insured reaches a particular age. Earlier a lot of insurance companies used to make this payment at the age of 100 years and recently many have dropped it down to 75 years.

Premium is usually paid till the sum assures becomes payable but many insurers provide an option to pay premiums for a limited period. Such policies would be called as Limited payment policies. People who are skeptical of the consistency of their earnings and expect it to discontinue or drop substantially over a period of time may prefer limited payment policies. This is often the case with professionals like sports personalities, skilled artists and armed forces personnel. Many a times, a person has or receives a lump sum amount from somewhere and is not sure whether he will be able to pay the same amount every year. For such customers, there is an option to pay the premium only once. Such a policy where the premium is payable only for one year at the beginning of the policy is called as a single premium policy.