Whole Life Insurance Policy

Investor Query: Please let me have your advice on Whole Life Insurance Policy?

Mr. Gerard Colaco: Viewed from any angle, whole life insurance is a poor choice. First and foremost, the very concept of life insurance is not properly understood. Life insurance is a protection against sudden, unforeseen and unexpected loss of earning power. Clearly therefore, life insurance is not needed during a person’s entire life, only during a person's financially productive life.

For example, a housewife who is not working and earning money out of her own efforts or toil does not need life insurance. Similarly, well after retirement, life insurance is not required. Whole life insurance opens up certain ridiculous situations such as a person having a life cover when he / she is not earning out of his own employment or business or profession.

Premiums are much higher than term insurance. If and when this policy acquires a surrender value, I think it should be surrendered. Anybody who goes in for a whole life insurance policy discloses to the world that he/she has no clarity about the role of life insurance. Insurance is for protection. Investment is for wealth creation. Rubbish like whole life policies attempt and fail to marry the two.