Basics of Whole Life Insurance Explained in Detail

Getting an insurance policy can be extremelybelow:
taxing for the brain. There are so many options1. Non-Participating: In these policies, death
available and each option has so many clauses andbenefits, premiums, cash surrender values and
articles that any person can be easily confused.other values pertaining to the policy are
However, one cannot also deny the importancedetermined unalterably for the life of the policy at
and advantages of having an insurance policythe time of policy issue.
these days. In this article, you would find the2. Participating: In participating policies, excess
basics of the whole life insurance explained inprofits are shared with the policyholder by the
detail.company. The paid refunds are generally not
As the name of the specific insurance suggests,taxable.
whole life policys are for the whole life of the3. Indeterminate Premium: Though the premium
insured as opposed to term life insurance policiesamount may vary from year to year in these
which are a for a specified number of years. Inpolicies, the amount never exceeds the maximum
term life policies, if the policy period ends beforepremium mentioned in the policy. They are similar
the demise of the person, then the wholeto non-participating policies otherwise.
investment goes in vain. To take care of this4. Economic: Economic policies are a combination
problem, the concept of whole life insurance wasof term life insurance and participating policies. In
started.these, an additional term insurance is purchased
Though the premium amount in whole lifeusing the dividends.
annuities is higher than the premium amount of5. Limited Pay: Annual premiums are paid for a
term life policies, the premium in the whole lifestipulated number of years in these types of
policies remains constant in general while thepolicies. They are otherwise similar to participating
amount in term life policies increases consistently.policies.
Another major advantage of whole life insurance6. Single Premium: Instead of the pay period of
contracts is the concept of cash reserve. Alimited insurance policies, a single large amount,
savings account is created in the name of thewhich is lesser than the summation of the
policy owner and a part of the premium amountpremium amount paid for years, has to be paid
is diverted to this account so that over time, aup front in these policies.
big cash reserve is created. The resulting pool ofWhole life insurance annuities are literally an
cash can be claimed by either cashing in the policyinvestment of a lifetime and therefore one must
or by borrowing some amount against it.research well before buying them. However,
Traditional whole life insurance annuities are of sixconsidering the inconsistent and variable nature of
types. The names of the different types and thehuman life, they are really a worthwhile
basic difference between them are mentionedinvestment.