Whole Life Insurance
What is whole life insurance?
Whole life insurance is a permanent life insurance that covers the insured for his entire life, as long as he makes timely premium payments. This policy has a level or fixed premium, which means the amount of premiums are the same through out the policy. Whole life insurance builds cash value; the policyholder can withdraw or borrow it from the insurance company.
History
Originally all life insurances were term life insurance, this policy only covers the policyholder at specific term and provides no cash value, upon maturity the insurance companies refund no money to the policyholder, and upon the expiration of a term life insurance, the insured no more benefits protection. This idea gave the buyers an impression of nothing happened nothing gained. Psychologically people were upset with this idea because as a consumer, people preferred money paid should be refunded.
In response, the insurance companies designed an insurance policy with fixed or leveled premiums, and accrued cash value is provided to the policy as saving. Because this life insurance policy covers the entire life of the insured, it is called whole life insurance.
There are various forms of whole life insurance
Limited payment whole life insurance
This policy allows the insured to pay his premiums for a specified number of years, it can be 10 to 15 years or up to a specified age, for example 55 or 60, and the coverage is lifetime.
The idea of this is to let those who want lifetime protection but do not like to pay their premiums for their entire life.
Modified whole life insurance
This policy has stepped premiums, the policyholder can pay lesser premiums when his income is little, then after a specific time he will have to pay a higher premiums when he earns a better income.
Single premium whole life insurance
The policyholder can pay a very large sum of single premium and have a lifetime protection, but this is very rare because the premium can cost many thousand of dollars.
Non-participating whole life insurance
All the values of the policy such as death benefits, premiums and cash surrender value are determined before the policy is issued and cannot be altered after it is issued. In future the insurance company will bear the underestimated expenses.
Participating whole life insurance
This is also known as with profits policy whereby the insurance company shares the profits with the policy holder. This offers a non-guaranteed cash value, and the greater the success of the company’s performance the greater the dividend. This dividend can be used to pay for the premiums or as cash refund.
Interest sensitive whole life insurance
This is a relatively new type of policy, the death benefit is remained for life and the premium can vary depend on market conditions but not above set limit, this is to allow flexibility in premium payments.
Advantages of whole life insurance
· The level premiums and accumulated cash value made this policy an ideal choice for those who want security and saving.
· The protection is lifetime, the policyholders need not worry the policy will expire, as well as they pay the premiums.
· The cash value can be borrowed.
· The policyholder can cease to pay premium for some time if he has financial difficulties, but the policy must have established cash value, this has a minimum period of more than 3 years.
· The premiums are level and will not increase through out the policy, so that the policyholder can make long term financial planning.
· The coverage can be increased.
· In most countries, the premiums are deductible for income tax.
There are many choices on whole life insurance; buyers are welcome to get free quotes on these various products, just enter your zip code, you can get whole life insurance quote and term life insurance quote.
