Whole life insurance refers to a policy that provides lifetime protection by paying a lump sum death benefit. Whole life policies differ from term insurance in that they have a savings component with earning accruing referred to as cash value. With this type of insurance a policy holder may take loans against the cash value which usually have a minimum guaranteed rate of interest. As with most life policies, whole life may be participating or non-participating.

Cash values are considered liquid enough to be used for investment collateral and are tax-free up to the point of total premiums paid. If the insured dies, the death benefit is reduced by any outstanding loans. Premiums payable may be a single payment or fixed periodic (monthly) payment that is payable for the life of the owner or in most cases until the insured reaches age 100.

Types of Whole Life Insurance
Whole Life- The face amount remains constant for life while the premiums are paid until age 100.

Limited Pay- The face amount remains constant while the premiums are paid for a specified term (20 years).

Current Assumption Whole Life (CAWL)- Hybrid between traditional whole life and universal life with level and fixed premiums. A person would want CAWL for fixed premiums, "forced savings" feature of whole life and the potential for better investment results than those guaranteed in traditional policies.

Variable Life- This policy is going to be more risky because of the variable investment feature with no guarantee of cash build up. The premium remains constant but the face amount may vary. The investment options under these types of policies may vary and benefits depend on investment performance.

Variable Premium Whole Life- Flexible Premium UL allows the policyholder to determine how much they wish to pay in premiums. In addition, Variable premium UL offers two different death benefit options: 1. Universal A- Level death benefit 2. Universal B- Increasing death benefit

Variable Universal Life- Variable universal life is a type of permanent insurance that combines death benefit protection with the opportunity to direct the investments into a broad selection of investment options. Variable universal life can fulfill two needs in one financial vehicle: death benefit protection and savings accumulation.

Types of Whole Life Policies

Related Articles
  1. Retirement

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
  2. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  3. Retirement

    Permanent Life Policies: Whole Versus Universal

    Permanent life insurance combines lifetime insurance with savings to provide lifelong security. Premiums are quite high because they’re partially invested.
  4. Insurance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  5. Retirement

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  6. Financial Advisor

    Understanding Life Insurance Premiums

    When buying permanent life insurance, what amount of premium should you pay for the coverage?
  7. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  8. Personal Finance

    The Best Life Insurance for Military Families

    Two of the most common types of life insurance are term and whole life. Here's why the latter isn't a good idea for most military families.
  9. Financial Advisor

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
Frequently Asked Questions
  1. I'm about to retire. If I pay off my mortgage with after-tax money I have saved, I can save 6.5%. Should I do this?

    Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many ...
  2. My wife and I both converted our Traditional IRAs to Roth IRAs over a decade ago and have invested the maximum allowed each year since. We're buying our first home soon. Do we both qualify for one-time, tax-free, $10,000 distributions?

    You and your spouse each qualify for a penalty-free distribution of up to $10,000 for the purchase, acquisition or construction ...
  3. Is a Thrift Savings Plan (TSP) a qualified retirement plan?

    Take advantage of the government's retirement plan for employees with the Thrift Savings Plan. As with a 401(k), contributions ...
  4. Who manages the assets in a Roth 401(k) account?

    Learn how to personally manage the assets in your Roth 401(k) plan and determine the best options available to help meet ...
Trading Center