Whole Life Insurance
Whole life insurance is also known as whole life assurance in the countries that were colonized by Britain and also in the UK. This is an insurance policy that involves yearly payments of premiums into the policy, and it remains constant as long as the insured lives for his whole life. Whole life insurance came up as a result of an insurance policy that was termed as Lost Opportunity Cost (term life insurance). Types of whole life insurance policies are interest sensitive whole life (also called excess interest), economic, participating, non-participating, limited pay, indeterminate premium and single premium.
An interest sensitive whole life insurance policy is a blend of universal life and traditional whole life policies, because death benefit does not change and payment premium might change (must be less than the maximum guaranteed premium), respectively. The interest on this insurance policy can also change depending on the market conditions. In a non-participating insurance policy, the issued policies cannot be changed afterwards and the insurance company always retains or makes up for any difference that might occur in future while with-profits policy (participating), bonus is shared between the insured and the insurance company. The bonus is considered an overcharge on premiums hence it is never taxed and the degree of participation determines the amount of bonus that either party gets. Single premium is a type of limited pay (due for a specified period of years) that involves an upfront payment, whereas economic policy is a blend of term life and with-profits insurance policies that can lead to a high yield of death benefits in the long run. Indeterminate premium is bound to change from year to year.
In whole life insurance policies, the insured are required to pay premiums throughout their lives on a yearly basis. It can also be paid with a single large premium or an arrangement be made so that an upfront pay up is made for up to five years. Large premium payments are not allowed later in the contract life of the policy, if such a lump sum payment was not initially made when the insurance contract was signed.
Although, some whole life policy contracts can allow for that as long as scheduled minimal payments are made. Bonuses, death benefits and cash values are guaranteed by the insurance company and are usually paid through cheques, used to reduce premiums, or be reinvested into the policy to increase the death benefit and value of cash at a higher rate. Cash values are usually liquid enough to be used for capital investments, as long as the insured continues to pay premiums as required.
A great Whole life insurance policy is right for you if you are looking for fixed premiums, guaranteed death benefit payout, dividends that can increase the policy value and a financial security for your loved ones when you die. Ultimately, with a whole life insurance policy, you get to enjoy a lifelong coverage that has no medical exams in the future as well as tax savings.