Life Insurance - Whole Life Insurance

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. Professionals

    Variable Life Insurance

    FINRA Series 6: Section 11 Variable Life Insurance. In this section discussion on Variable Life Insurance Policy and its structure, premiums, earnings and policy loans
  2. Professionals

    Variable Life Insurance

    FINRA/NASAA Series 26 Section 3 - Variable Life Insurance. In this section structure of variable life insurance, premiums, earnings and policy loans
  3. Insurance

    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.
  4. Professionals

    Comparing Life Insurance Policies

    Comparing Life Insurance Policies
  5. 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.
  6. Insurance

    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.
  7. Home & Auto

    Intro To Insurance: Types Of Life Insurance

    By Cathy ParetoLife insurance protection comes in many forms, and not all policies are created equal, as you will soon discover. While the death benefit amounts may be the same, the costs, structure, ...
  8. 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.
  9. Insurance

    Which Life Insurance is Right For You?

    Consumers have choices when it comes to life insurance. Knowing your future needs for cash or retirement can make the difference in what you select.
  10. Personal Finance

    Understanding Life Insurance Premiums

    When buying permanent life insurance, what amount of premium should you pay for the coverage?
RELATED TERMS
  1. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  2. Variable Death Benefit

    The amount paid to a decedent's beneficiary that is dependent ...
  3. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  4. Variable Universal Life Insurance ...

    A form of cash-value life insurance that offers both a death ...
  5. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  6. Variable Survivorship Life Insurance

    A type of variable life insurance policy that covers two individuals ...
RELATED FAQS
  1. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  2. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  3. If an individual becomes a policyholder of a variable life insurance policy and ...

    The correct answer is b. Insurance companies issuing variable life policies must allow the holders of those policies to exchange ... Read Answer >>
  4. What is indexed universal life insurance?

    Indexed univeral life insurance is a lot like universal life insurance, however it does have a couple of wrinkles not found ... Read Answer >>
  5. How can I borrow money from my life insurance policy?

  6. How are life insurance proceeds taxed?

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center