Definition of Whole Life Insurance

Whole life insurance is one of several types of life insurance you can purchase.  Simply defined, whole life insurance is permanent insurance that will last as long as the person lives and keeps paying the premiums. Whole life insurance is designed to provide protection for the whole life of the insured person. Whole life insurance is a good choice for you if you want to ensure that you have a life insurance policy in place for your entire lifetime and can comfortably afford the premiums, which will never increase. Also, many choose a whole life insurance policy to aid in their retirement planning.

Cash Value in Whole Life Insurance

Each whole life insurance policy has a guaranteed cash value, which usually grows based on a pre-determined schedule during the life of the policy and which should equal the death benefit upon maturity of the policy, typically at the age of 99 or 100.  Cash value in your policy will grow very slowly in the first few years of ownership, and as time goes on, the amount will increase more rapidly. The cash value in your insurance policy can also be used to  buy a paid-up whole life insurance policy in a reduced amount if you want to quit paying premiums, or you can access the cash value anytime from your policy in what is called a policy loan. Cash values are not paid to the beneficiary upon the death of the insured; the beneficiary receives the death benefit only.

Whole Life Insurance Premiums

Whole life insurance premiums generally are level and payable for life. Since premiums stay the same over time, the younger you are when you purchase your whole life policy, the cheaper those premiums will be. They may be more expensive than other types of insurance policies, but it is a permanent policy, and that premium amount is guaranteed never to increase over time, knowing what to expect month to month.

The Payout

The insurance company will pay the face amount of the policy to the named beneficiary on the death of the insured.  Or if you live to the age of 99 or 100 depending on your policy, than the face amount of your policy will automatically be paid out to you. That is the primary benefit of whole life insurance: a payout is guaranteed

Whole life insurance is popular since it provides protection for the long term, and will never expire unless you stop making payments.  Whole life insurance is the original life insurance product, as well as the only truly guaranteed insurance policy that you can buy.  Not only does it provide income replacement in the event of a premature death, but it also comes built in with a savings component that can last for your entire life, which makes it popular for retirement planning as well. If you choose to buy a whole life insurance policy, be prepared to pay into it for the long haul.

I do not recommend buying any type of whole life or variable life type policy. The benefit you can gain by investing the money that you would be saving by buying term life insurance or some other protection is tremendous. In addition, if you die an untimely death, all the cash value portion of your policy disappears. Again I protest that you should develop a plan for financial freedom, set a timeline, and buy term life insurance to cover that timeline. Life insurance should not be needed when you reach the retirement age. For more information, check out Term Life Insurance Definition and Term Life Insurance vs Whole Life.

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