Whole-life policies are issued for life. It means that the policy amount will be paid at the death of the life assured. The life assured, thus, cannot get the policy amount during his life time; only his dependents will get the advantages of his policy.
The whole life policies can be effected either by payment of
(i) single premium
(ii) continuous premium
(iii) limited premium
The single premium payment is not very common whereas the limited premium payment is the most popular form of whole-life policies because, it is convenient to the policy-holder to arrange the payment of premium during his income-earning period.
In continuous premium payment, this benefit is not available because premium is payable up to the life of the policy-holder.
This is losing its importance because only the dependents of life assured are getting the benefit. Also, in extreme cases, he pays, more by way of premium than the benefits relievable under the policy and that too when earning capacity of the assured is reduced.
This plan is cheaper and suits to a young man with limited resources and whose requirements for protection is maximum.
It is , also beneficial to pay estate duty. If payment of premiums, ceases after at least, 3 years’ premiums have been paid, a free paid up policy for such reduced sum, as can be allowed according to the rules, will be automatically secured provided the reduced sum assured is not less than Rs. 250.
Limited Payment Whole-Lite Policies
The payment of premium is limited to certain period, although the amount secured under this plan is payable on the death of the policy-holder.
Premium under this plan is higher than the premium payable under a whole life plan. The amount of premium depends upon the number of annual premiums stipulated since premiums are payable for a selected period of years or until death if it occurs within this period, the life assured is satisfied to know the amount of maximum premium payable.
If the life assured survives the premium paying period, the policy continues in full force, provided all premiums have been paid, but no further premiums are required to be paid.
With profits limited payment policies do not cease to participate in profits after completion of the premium-paying period but continue to share in the periodical bonus distribution.
This plan is suitable for persons in whose case the need for money would arise only on the happening of the death, but who either on account of personal and family history are not eligible for a whole life plan or do not want to extend the premium-paying period beyond their earning years.
The minimum amount for which a policy will be issued under this plan is Rs. 1,000.
Convertible Whole-Life Policy
This is a whole-life policy which gives it holder an option to get it converted at the end of the five years, into an endowment policy. If this option is exercised, the policy no longer remains a whole-life policy, if it is not exercised the policy continues to be, a whole-life policy.
The policy is designed to meet the needs of the young man who is on the threshold of his career and has prospect for increase in income after a short period.
The object is to provide maximum insurance protection at a minimum cost and at the same time to offer a flexible contract which can be allowed to an endowment policy, at the end of five years of the policy.
If the option is not exercised, the policy continues as a whole life assurance with premiums ceasing at age 70.
If the policy is converted into endowment, the premium is suitably increased. However, no difference in premiums for the previous five years, and interest thereon, will be charged and he is not required to go under fresh medical examination.
The vested bonus additions would be altered to an amount which the policy would have earned had it been effected from the commencement as an endowment policy and further, the policy would thereafter be entitled to bonus at the rate applicable to endowment assurance.
The minimum sum assured for which a policy will be issued under this plan is Rs. 5,000 and the maximum age at entry shall be 45 years.