What Are The Benefits of Whole Life Insurance Policy?

whole life insurance

Brief History:

It is said that whole life insurance plan is one of the earliest plans of life insurance business. Traditionally, this plan had limited intention; that is providing insurance cover for the entire life of the insured person. The plan intended to give the death benefits under the policy to the nominee of the policy holder. The plan became popular because it covered life risk and in the unfortunate event of the policy holder dying earlier to his retirement or old age, the family would get financial support from the insurance policy.  However, with the growth of insurance sector and the change of economic scenario in various parts of the world, the whole life insurance plan underwent several transformations.

whole life insurance

Later Developments:

In course of time insurance sector became a domain of private sector. Gradually several private companies entered insurance business. In order to attract customers these companies brought several modifications to this type of life insurance plans with several added features. For example, companies allowed individuals to avail loans on the premium paid by them. The policy holder was given an opportunity to refund the loan either in part or in full. Alternatively, the policy holder was given an opportunity to authorize the insurance company to set off the loan amount and the interest against maturity value. The payment of premium was made flexible so as to suit the convenience of the policy holder. In course of time, insurance companies started giving dividend on the policy. Here again, the policy holder was given an opportunity to authorize the insurance company to use the dividend against future premium which may become payable after the person retires. The policy holder also had the option to use the dividend as a retirement benefit. The government also encouraged insurance sector by offering various tax rebates on insurance premium paid and on maturity value received from insurance companies.

Shortcomings of This Policy:

 Of course, this policy has some drawbacks. In the first place the premium payable for this policy is considerably higher as compared to other types of policies. Some of the insurance companies include some hidden cost while computing the premium. For example some insurance companies include commission payable to the agents in the insurance premiums. Some of the policy holders withdraw substantial portion of the amount as loan to fill up the monthly budget gap. As a result the death benefit for the nominees gets reduced substantially.


Although it has some drawbacks, this policy has several advantages. As experts put it, the advantages outweigh the disadvantages. Experts argue that insurance companies charges higher premium to cover the risk of premature death payments. In so far as hidden cost is concerned various governments have brought out exclusive legislation to curb such trend. Considering from all these angles, experts are of the opinion this type of insurance is always beneficial to the policy holder.

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