Whole Life Insurance

You generally pay the same amount in premiums for as long as you live. When you first take out the whole life insurance policy, premiums can be several times higher than you would pay initially for the same amount of term life insurance. But, they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years.

There are two major types of whole life insurance.

“Straight life”, “ordinary life”, “whole life”, and “continuous premium whole life” are terms used synonymously with the first type of whole life insurance contracts. The second type of whole life contracts are termed “limited payment whole life insurance” contracts. Both promise to pay the face death benefit amount upon death. The major difference between these two types of whole life insurance contracts is the premium payment period.

Some whole life insurance policies let you pay premiums.
You pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these whole life policies are higher since the premium payments are made during a shorter period. Limited payment whole life insurance contracts emphasize savings more than straight life insurance contracts. They make it possible for the insured to stop paying premiums at a certain period without any reduction in the face amount of the limited payment whole life insurance contract.

Whole life insurance may be participating or non-participating.
Not all whole life insurance policies pay dividends from company surplus. Whole life insurance policies that pay a dividend from the company surplus are called “participating whole life insurance” policies and those that do not pay dividends are called “non-participating whole life insurance ” policies.

Participating whole life insurance.
Participating whole life policies usually require a higher premium for a particular face amount of whole life insurance. The dividends are not guaranteed, however, over a long period of time. Participating whole life insurance contracts will develop higher cash availability in the policy then their non-participating counterpart. Dividends can also be use to reduce premium payments, purchase paid-up additional whole life insurance, accumulate at interest for future use, or be taken in cash.

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