Whole-life and Endowment Insurance

A whole-life insurance on the other hand provides you with life-long protection. A whole life insurance pays out the death benefit upon the death of the insured. It is costlier than the term plans with the same level of coverage. Cash values will build up after a minimum period. Premiums are fixed at the time of purchase and will not increase over the years. ‘Riders’ may be attached to the policies. Riders are ‘add-ons’ to enhance the benefits of the policy, such as including the coverage for critical illnesses. This will require additional premium to be paid and the premium of some riders may increase with age. There are participative and  non-participative whole life insurance. Participative policies shares in the profits of the company’s ‘life fund’. Your share of profit is paid in the form of bonus or dividend. Bonuses and dividends are projected and hence not guaranteed. A non-participative policy is not entitled to any profits the life fund may make. In whole life insurance, premiums are payable over lifetime or a limited period depending on the type of whole life product. When considering whole life insurance, keep in mind that buying life term insurance is a long term commitment. Consider the amount of premium you will be able to pay, as early termination may result in losses.

Endowment insurance policies are often marketed to help you meet financial goals like paying for your children’s education or building up savings over a fixed policy term. Endowment insurance policy pays out the death benefit upon the death of the insured.  It usually matures after a fixed period of time, for example, 10, 15 or 20 years. there are participative and non-participative endowment insurance. The bonuses or dividends projected by the participative plans are not guaranteed. The cash value will build up after a minimum period. Endowment insurance policies are more costly than the term and whole life insurance, given the same amount of sum assured. The sum assured is paid out when an insured event occurs. When considering endowment insurance, compare the features, returns and risks of the product against those in the market. Buy one that can meet your needs. You should be able to sustain the payment in the long term as terminating the plan before the maturity date will result in losses.

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