What is “whole” life insurance?
Whole life insurance is an insurance policy that will cover for as long as you live, your ‘whole‘ life – up to age 100 or longer!
Traditional whole life insurance is different from other permanent insurance due to the guarantees that it offers: the amount of the death benefit and rate of growth of its cash value are guaranteed in the contract. Also, the premiums are level and remain the same from day 1.
Whole life policies are structured in such a way as to mature (usually when at 100 years of age). At that point, the death benefit is paid out to the insured and the policy is terminated In this sense, whole life policies may not actually continue for an entire lifetime, but they are guaranteed to pay a ‘death’ benefit whether you live or die.
The cash value of whole life
All whole life insurance policies include a separate account designed to accumulate cash value. As such, it is a semi-liquid asset and can be used for a variety of purposes.
Traditionally, the cash value grows at a guaranteed rate that is spelled out in the policy. Therefore, your cash value is guaranteed to be a certain amount at any given time.
Variations of whole life insurance
Single premium whole life insurance—The entire policy is paid up with the first premium.
Adjustable whole life insurance—The death benefit and premium are adjustable.
Participating whole life insurance—The policy owner receives dividends as a shareholder in the insurance company.
Modified premium whole life insurance—Premiums start low and balloon up.
Graded premium whole life insurance—Premiums start low and regularly increase over time.
Variable life insurance—The interest rate of the cash value depends on the underlying investment performance.
