Whole life is an insurance policy that guarantees a person's beneficiaries will receive a set amount upon their death.
While there are several types of life insurance, there are about as many types of whole life insurance policies, allowing a person to find the best product for his family's security by choosing from the following options:
- Non-participating
- Participating
- Level premium
- Limited payment
- Single premium
- Intermediate premium
Non-participating Whole Life Insurance
This type of policy is very common and popular among those who purchase whole life. People like it because of its simplicity. The premium remains the same over the lifetime of the policy and the payout at the end is stated clearly. A downside is that it pays no dividends.
Participating Whole Life Insurance
The downside of non-participating whole life is the upside to participating whole life insurance, which pays dividends. The dividends are the result of favorable investment earnings and mortality. A boom time, such as the 1990's, when the baby boomer generation was even more plentiful than it currently is was a prosperous time for those with this kind of policy. For many, it still is.
Bearish speculators in the United States would predict that the near future would not be a time rich with dividend payouts due to the oldest baby boomers reaching the age of 70.5 years, which is when they are forced to withdraw from their deferred tax retirement vehicles, such as 401(k) accounts.
This leads some to believe that the stock market will dip, or fall, until there is a larger population of people contributing to the market than there will be in the next decade.
Level Premium Whole Life Insurance
This kind of policy is self-explanatory. Level premium whole life insurance has a monthly, quarterly, or annual premium that never changes. During the course of the insured person's entire life, he or she will pay the same amount.
Initially, the premium covers more than the cost of insurance. The excess goes into a fund that accumulates to make up the cash value. Since currency is expected to decrease in value in later years, the same premium maintains the policy, but could possibly be less than would sustain a similar one at that time.
Limited Payment Whole Life Insurance
While the name of this program gives a bad impression, it should not. A limited payment life insurance policy allows a person to pay higher premiums based on a plan set up with his agent to pay premiums up until a certain age.
Say a 45-year-old woman wants to buy insurance, but hates the idea of having payments on anything past the age of 65, when she expects to retire. A limited payment policy would be ideal. She will pay higher premiums over 20 years, but none after while still having a lifetime policy to pass on to her spouse, children, grandchildren, or favorite charity.
Single Premium Whole Life Insurance
Of all the types of life insurance, single premium is usually thought of most as a type of investment. With this kind of policy, a person will pay one large premium at the time of issue and not pay any further premiums in the future. As a result, the features of cash value and ability to borrow against the policy are present as soon as the policy starts.
Intermediate Premium Whole Life Insurance
Intermediate premium whole life plans are similar to non-participating plans, but the premium rate varies. As the cost of insurance goes up, so does the premium. A positive side to this kind of policy is that the rate has a cap that should prevent the plan from becoming unreasonably high.
Buying life insurance is important for those that have family members dependent on them for financial support. Spouses and children will have a lifetime of heartache living without someone that means so much to them. None of that heartache should have to involve financial worry if it can be prevented.
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