Leave a tax free legacy for your children with whole life insurance plans

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What would you like to leave for your children as your legacy? Definitely not debts and unfulfilled dreams. We do our best to safeguard our offspring from any financial contingency. But have we ever analysed how much do we need to create a sufficient legacy?

Traditionally, people considered property as the only way to safeguard the future of dependents. But real estate being a big-ticket and illiquid investment, people started looking at equity as an alternative.

Equity investments come with their share of uncertainties. Rate of return depends on several factors like company performance, government policies, economic and industrial growth. Equity is more suited for investors with high risk capacity and long term vision.


Whole life insurance plans can be one of the ways to create a legacy for your children and grandchildren. Lets understand from the below table.
icici table
*Assuming a conservative ROI of 7% the corpus after 20 years will be around Rs 4 crore.
**Based on average premium by leading insurance companies. (Source: Policybazaar)

In case of death of the policyholder during the policy term, provided all due premiums have been paid, the nominee will receive the lump-sum Sum Assured immediately. You can choose any policy term between 5 to 67 years or fixed term coverage till age 99+ years.

Some whole life policies have the option to increase Sum Assured at different life stages like marriage, birth or adoption of child. The policy premium payable would increase by the premium corresponding to the additional Sum Assured in such a case.

Whole life plans do not have any maturity or survival benefit. In case the policyholder survives the term, he or his nominee will get no benefits in any form.Also, if you opt of regular yearly premium policy during the term, your policy will not acquire any Surrender Value throughout the policy term and therefore there is no amount payable upon surrender. In case of single premium policy, you may get some part of the premium paid so far as per the conditions laid out in the policy documents.

It’s advisable to read the policy documents before buying the insurance plan to know about clauses and additional benefits.

There are many government-backed instruments like PPF, NSC, NPS that can be considered for creating a legacy . Mutual funds also solve the purpose of creating a big corpus by beating inflation in the long run. However, what happens if you pass away before you have built the desired corpus for your legacy? To take care of this risk it is advisable to take an appropriate life insurance cover.
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A family already shattered by the personal loss of a dear one has no mental strength left to take care of the financial problems left by the bread winner. In such situations, term insurance plans can be a saviour. The nominee immediately gets the death benefit in case of a term plan. Term plans are pure life insurance plans.

The amount of life insurance a person needs depends on his/her life stage, requirements and liabilities. However, industry experts say that an earning individual up to 40 years of age could consider buying a term plan with a sum assured 20 times of annual income. Ideally, the sum assured chosen should cover your debt and leave a substantial amount for your children too.
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Whole life insurance leaves a tax free inheritance for your children (policy nominees) in addition to your existing assets. Alternatively, if you have designated existing assets for one heir but also want to provide for another heir, whole life insurance is the answer.

Whole life option of term insurance plans provide you cover for 99 years. Whole life insurance is different from regular insurance policies that have defined term of 10, 20 or 30 years.

People with financial dependents for limited period of time may opt for basic term plans but those who have dependents for a relatively longer time should consider whole life insurance plans.

In India, buying insurance is hardly at the top of anyone’s mind. But the fact remains that insurance is one of the best ways to secure your family and pass on a legacy.

While the holder of a pure term plan policy does not get anything in return if he survives the term of the policy but the mental peace one derives from a term plan- in terms of securing one’s family’s financial future - is unmatched.


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