Whole Life Insurance
life provides a death benefit and an accumulating cash value.
By definition, it has a fixed premium and a level death benefit
to age 100. The premiums don't increase with age, which averages
the cost of the policy over your life. The cash value increases
with time until it equals the death benefit at age 100. Whole
life is also known as Ordinary (or Permanent) life insurance.
This type of policy never has to be renewed or converted.
The cash value is an amount of money that you are guaranteed
to receive in the event of policy cancellation. You also have
the right to borrow against the cash value on a loan basis.
are several variations of Whole life.
most common are Modified Premium and Graded Premium. These
policies are used when whole life protection is needed, but
can't be afforded. Modified Premium policies typically have
a lower fixed premium for the first 3 or 5 year period, at
which point premiums increase. Modified policies work well
for individuals that expect to improve their financial condition.
Graded Premium policies are similar, except the premium increases
each year for the first 5 years, and then becomes fixed after
that. Another common version of whole life is Limited-Pay.
These policies are a variation that make it possible to stop
premium payments at the end of a specified time period without
a reduction in the death benefit. In other words, the policy
becomes fully paid prior to age 100. The most common examples
of this are 10 Payment Life, 20 Payment Life, or Life Paid
up at 65.
Ownership and Beneficiaries
is strongly advised that when purchasing life insurance an
attorney and or a Certified Public Accountant is consulted.
There are several crucial decisions that need to be made with
respect to the policy details.
the whole life policy may be financial protection for your
life, the owner of the policy doesn't need to be you. In many
cases it is beneficial for your spouse, a trust, an estate
or a business/corporation to own the policy. The general rule
that applies is that the owner and beneficiary need to have
an "insurable interest". Simply put, that person
or corporation needs to have a financial interest in your
life insurance companies pay dividends to policyholders after
they have owned a policy for a specific period of time. Policies
with participating stock insurance companies and mutual insurance
companies sometimes pay dividends if the company is profitable
and declares a dividend. Dividends are in no way and under
no circumstances guaranteed and are only one factor in determining
the potential value of a policy. The Internal Revenue Service
has considered dividends on life insurance policies to be
a return of excess premium and therefore not a taxable event
(Consult your tax Advisor).
what your grace period is and make certain that the insurance
company receives your premium on time. Coverage can be canceled
if premiums are not paid on time. It is possible reinstate
coverage if this occurs, but if you need it badly you will
most likely be denied.
for all options of paying your premium (monthly, Electronic
Funds Transfer, quarterly, semi, annual, and annual) in order
that you may evaluate your options carefully. Discounts are
generally given for EFT and annual modes of premium payment.
your policy carefully. Among typical exclusions are suicide,
death while in the commission of a felony and death that occurs
as a result of an act of war, but a few exceptions exist.