Types of Whole Life Insurance 

Types of Whole Life Insurance

In the present booming American economy, many people are exploring different investment options. These include options that require involvement with the stock market, but they also include options within the realm of the insurance industry. There are some types of whole life insurance policies that present wonderful opportunities for older folks to manage their wealth. They also show potential for younger people who are interested in delving into investment vehicles that produce stability on the long term.

Whole term life insurance, also known as permanent life and straight life insurance, is very diversified. It provides a way for people to create a savings account that will reward benefactors in the future. It also creates potential lines of dividends and monetary security for themselves. Purchasing a whole life insurance policy is a big financial decision. Some people view whole life insurance as a long term investment strategy. Other people view whole life insurance as a way to secure money for future generations. In either case, it is beneficial to understand the variances in the different types of whole life insurance available to consumers.

Primary Features of Whole Life Insurance Policies

Unlike term insurance, whole life insurance policies are based on the perceived lifespan of the policy holder. This is the major reason why people who are looking for whole life policies should do so when they are younger. This type of insurance assumes certain life stage changes, but allows for the building of cash value, one of the many benefits of whole life insurance policies.

Whole life insurance is purchased as a policy that has a set benefit, but has the power to create revenue. This revenue can be used by the policy holder as long as premiums are paid. This revenue is generated through the company providing the policy, and it is free of most taxation burdens. A whole life insurance policy is a way to generate some financial security within an agreement that continues to hold value over long periods of time. That period is usually the lifespan of the policy holder.

Understanding Whole Life Insurance Differences

The basic premise of what whole life insurance policies are is securing a payout to beneficiaries upon the death of the policy holder. Someone can buy a policy, and continue to pay premiums as the policy increases in value. Whole life policies are significant because they hold a cash value. This cash value can increase because of things like premium payment contributions, and the way in which the holding company profits from investing the premium amount on the open market.

Since whole life insurance policies are market-driven, they are offered in a wide range of variations. These insurance variations include several options for policy holders. These options are traditional, interest-sensitive, and single-premium.

Types of Whole Life Insurance

Traditional Whole Life Insurance Policies

Insurance companies offer an incredibly diversified range of insurance policies. Traditional whole life policies allow a person to purchase insurance with a set agreement for policy value. Traditional whole life policies include benefits such as:

  • Premium payments that add to the cash value of a policy.
  • Borrowing and dividend options at any point during the policy's maturity.
  • Tax-free revenue accrual that is fluid for various financial needs.
  • Guaranteed payout amounts no matter the state of the market.

In order to understand the pros and cons of whole life insurance purchases, it is always a good idea to consult with a financial planner before purchasing a policy. Traditional insurance policies are better for some people. These include younger people who are looking for ways to start a family security plan, or initiate a 'forced' savings routine. Traditional whole life policies have interest benefits that are similar to other banking savings accounts. They can generate revenue that can be used for things like providing secure holding information when applying for a home loan.

The Wide Range of Whole Life Insurance Policies

There are at least six variances of traditional whole life insurance policies. Each is available to satisfy the investment and security needs of people in diverse financial situations.

Type Description
Non-Participating These policies have fixed interest rates and dividends according to an initial payment. They are limited in how much they will grow over time.
Participating These policies use premium payments as fluid control. Market factors determine the amount that the policy value will grow.
Indeterminate Premium Policies in this category are supported by company investments. Payments may increase due to market slumps, but they will never go beyond a guaranteed premium maximum.
Economatic Dividends accrued with type of policy can be used to purchase other forms of supplemental insurance.
Limited Payment This type of policy has higher premiums for a limited number of years. Once the premiums are satisfied, the policy benefits remain permanent.
Single-Premium One large initial payment starts this policy in motion. It remains active for the life of the policy-holder. The initial payment can be extraordinarily high.

Whole life insurance is often classified as universal, permanent life, or straight life insurance. It is different than term life insurance because it assumes the risk of the entire lifespan of the policy-holder. Term life insurance is purchased for a set period, such as twenty or thirty years. Whole life insurance is active throughout a person's lifetime. The company issuing the policy assumes the likely risk of death. For this reason, whole life policies can be expensive.

In general, whole life insurance is best utilized by younger people. This type of insurance policy generates a dividend potential that can be used for various types of financial help. Also, the longer a whole policy is in effect, the greater its value will become. Whole life policies are also good for older people who are looking for ways to shelter money. They can use excess funds to create a policy that will carry extreme value upon the event of their death. This is ideal for parents, grandparents, and guardians who are trying to create monetary benefits for deserving family members. In the event of a policy-holder's death, a whole life insurance policy will become an activated savings account.

The types of whole life insurance policies offered match the diverse needs of individuals and families. These policies can become good investment vehicles if they are paired with sound advice. Though they offer amazing benefits, they should be purchased only after meeting with a qualified life insurance agent. Matching the right policy with a life goal can be difficult. All options should be explained an explored before a purchase. This is especially true when a whole life premium is finalized. If it is determined that a whole life policy is best, there is a policy type to match your long term goals.

Disclaimer: TermLifeInsuranceUSA.com is not a licensed insurance agency or broker. The content of this website is for informational and comparative purposes only and is not intended to take the place of professional advice from a licensed insurance agent. TermLifeInsuranceUSA.com recommends that all consumers consult with a licensed insurance agent before purchasing any insurance policy.

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