Does a Whole Life Insurance Help Achieve your Retirement Goals?

A whole life insurance plan provides coverage up to 99 years. Such policies require you to pay a fixed premium for a predefined period. You can withdraw the policy or avail of a loan against it after completing a minimum duration, which is generally three years. Apart from providing insurance, such plans also help you achieve your retirement goals.

How whole life insurance plans can be helpful in retirement planning?

  • Long-term Investment Horizon

Whole life insurance is essentially a long-term financial instrument that allows you to build a retirement corpus through regular premium payments over 15 to 20 years. Therefore, you have enough time to accumulate wealth without straining your finances.

Furthermore, the investment in whole insurance grows with a compounding effect, and you can earn interest on interest with every passing year.

  • Financial Discipline

Everyone does not necessarily have the financial discipline to stay on course for a long duration without getting distracted by avoidable expenses. However, you can develop financial discipline by investing in whole life insurance plans as they require you to pay your premium regularly. This helps you stay focused on your priorities and build a corpus for the future.

  • Different Investment Options

Whole life insurance can provide you with different investment options depending upon your retirement objective and risk-taking capabilities.

For example,

  • If you want high returns, you can invest in a market-linked plan that will invest your money in the stock market. While it has high returns potential, it also bears an increased risk.
  • Suppose you are risk-averse and do not mind relatively lower returns. In that case, you can choose a non-linked insurance plan that will invest your money in debt instruments like government bonds and treasury bills, which enhances capital safety.
  • You can also invest in a retirement plan that has exposure in both debt and equities. Such plans allocate your funds in different financial instruments depending upon your risk appetite and age. So, they invest in the equities while you are young and gradually tilt your portfolio toward low-risk instruments as you grow old.
  • Pension Planning

While whole life insurance does not provide pension benefits, it can indirectly help you plan for your pension. For instance, some participating plans can pay bonuses. Additionally, there can be some survival benefits on maturity as well.

Together, they can help you accumulate a lump sum amount that you can use to buy an annuity plan that provides regular pension post-retirement.

  • Duel Benefit

Apart from being an effective retirement planning tool, an insurance plan can financially safeguard your family and dependents if something happens to you by providing death benefits to the nominees.

  • Tax Benefits

You can claim income tax exemption over the insurance premium paid under section 80C of the Income Tax Act.

The advantages of whole life insurance make it a favourable option for retirement planning. Additionally, you can consider including other financial products to diversify your investment portfolio.

The bottom line is planning for retirement without compromising your family’s future, and life insurance can meet this objective without any hassles.