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. Insurance

    Life Insurance: Foundation to a Solid Portfolio

    Life insurance should be a foundation of an overall financial portfolio. Here's why.
  2. Financial Advisor

    Life Insurance: Variable Vs. Variable Universal

    Do you know why you might need one policy versus the other? Read on to find out the difference between Variable and Variable Universal life insurance.
  3. Insurance

    Whole Life Insurance: A Gift That Grows

    The gift of whole life insurance may not be exciting for a child, but it could eventually help them pay for college or purchase their first home.
  4. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  5. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  6. Insurance

    How Cash Value Builds in a Life Insurance Policy

    If you have permanent life insurance, more of your insurance premium goes to cash value in the early years of your policy.
  7. Insurance

    6 Ways to Capture the Cash Value in Life Insurance

    Here's how to make the cash value of your life insurance policy benefit you or your beneficiaries instead of the insurance company.
  8. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    The pros and cons of increasing death benefit life insurance policies versus levelized death benefit policies.
Trading Center