What Is Whole Life Insurance?

By Patrick Cooper Posted in Life Insurance News

Development Of Whole Life Insurance

Whole life insurance was developed to ease the turmoil over term life policies. Consumers were upset that they could potentially be making monthly premiums on life insurance for twenty to thirty years. With a whole life policy, higher premiums are paid over a predetermined amount of time for a certain policy amount. Even if the insured only paid the premiums for ten years, the coverage would last until their death even if they died after they completed making the monthly premiums. Participants in a whole life policy also have the option of cashing in the policy after the policy matured, between 94 and 100 years old.

There Are Several Types

There are several different types of whole life insurance; single-premium, non-participating, economic, limited pay, participating, indeterminate whole life and a newer form, interest-sensitive whole life. The types of policies offered vary by insurance company and the state the policy is purchased in.

In a single-premium policy the total premium is paid up front. In a non-participating policy all values pertaining to the policy, including death benefits and cash value, are determined when the policy is purchased and cannot be changed after the policy has been purchased. In a participating policy the insurance company shares the profit made from other policies with the participating policyholder in the form of overcharges on premiums and refunds.

An economic policy is a mix of term life and participating insurance. In this policy the extra money is used to purchase additional life insurance resulting in a higher pay out after death and a larger cash value. A limited pay policy is like a participating policy but the premiums are paid out for a limited number of years instead of the life of the insured.

Indeterminate whole life insurance is similar to a non-participating policy but the premiums may vary from year to year. The newest form of life insurance, interest-sensitive insurance, is a mix of universal life insurance and whole life insurance. Certain causes of death are covered while others are not.

Special Circumstances

Typically in all forms of whole life insurance, the policy premiums must be paid by the insured and not by another party unless there are special circumstances. There has been a rash of deaths for insurance policies and the insurance companies are starting to restrict who can pay on the policy.

Related posts:

  1. What Are The Different Kinds Of Life Insurance Plans?
  2. What Are Life Insurance Policy Limitations?
  3. How Does Single Premium Life Insurance Coverage Work?
  4. What Is The Difference Between Accidental Death Vs Whole Life Insurance?
  5. What Is A Limited Pay Life Insurance Policy?

Leave a Reply