April 07, 2019


WHOLE LIFE INSURANCEWhole life insurance or whole of life assurance is a kind of insurance policy that remains valid throughout the insured’s entire life – time as long as the required premiums are paid or the maturity date. Whole life insurance is a contract that is entered between the insured and the insurer as long as the terms and condition stipulated in the policy are met. 
The insurer’s duty is to pay death benefit of the policy to the policy‘s beneficiary policy usually have a fixed premiums based on the issued age, and usually do not increase with age. The insured party usually have to   pay his or her premium while death unless for a limited pay policies which may be paid up in 10 years, 15 years, 20 years or even 65 years. Whole life insurance includes also to the “cash value” category of life insurance which also belongs to universal life variable life and endowment policies.
Whole life insurance policy is the most popular of life insurance policy because it can guarantee payment to the beneficiaries upon the death of the insured. An interesting part of this policy is that it has the savings portion called the cash value including the death benefit. Making a cash value grow is an essential component of whole life insurance.
For a policy holder to build up cash value, he/she can remit payments more than the normal premium. In addition, dividends received can be reinvested into the cash value and earn interest. The essence or advantage of cash value is that it:
1)    It can serve as a source of equity (Asset – liabilities = equity) to the policy holder.
2)   The cash value offers a living benefit to the policy holder (In order to access this, the    policy holder requests a withdrawal of funds or a loan).
3)    The owner can withdraw funds up to the value of total premiums.

 In essence, the cash value increases, it gives the insurer a reduced net amount of risk that is to say “more cash value, less risk involved”. For example, Getbeg insurance company issues a 30,000 life insurance policy to James Rodler, the policy owner and the insured and as time progresses the cash value accumulates to 15,000. Eventually when Mr. James Rodler dies, the insurance company will pay the full death benefit of 30,000. Which eventually means the insurance company will only realize a loss of 15,000 due to the other 15,000 accumulated cash value. “The net amount of risk at issue was 30,000 but the death of the insured Mr. James Rodler was 15,000.
Death benefit of whole life insurance
The benefits at the death of the insured stipulated in the policy contract. Some policies allows for the payments of dividends. The beneficiary(ies) to this policy be held in account and distributed in allotments. And more also, if the insurance policy was sold before the death of the owner, then there nay likely be taxes assessed on the proceeds from that sale.

 In other words, death benefit of a whole life policy is normally the stated face amount where the death benefit will be increased by any accumulated dividend values and/or decreased by any outstanding policy loans. Death benefit of whole life policy is usually paid at the death of the insurer or the maturity age “100” depending on whoever comes first and when such person crosses or goes above the age of 100, it is known as “matured endowment” and therefore the person receives the face amount in cash.
But on research findings, maturity ages have been increased to 120 but also depend on the insurance company.
The whole life insurance can be very useful and attractive because it offers coverage for a very long period of time. This policy covers the personal and family needs and also the business needs and these personal and family needs include:
·        Supplemental retirement income

·        Surviving spouse income

·        Funeral expenses and

·        Estate planning
The disadvantage about this policy as rightly said is because it is relatively high on premiums when insuring:

  •  Growing families with large needs and less source income
  • ·Large debts

  • Temporary needs such as years in which children depends to meet the daily needs

  • The business needs include:

  • Finding of buy-sell agreements

  • Death of key person

  • Deferred compensation

  • The supplemental executive retirement plans (the E.S.R.P)
There are different types of whole life insurance, in order to find the one good enough for you and meet your needs, you have to careful look at the laid down policy or statements in the policy and choose the one best suits you and they are as follows:
  1. ·        Participating whole life insurance
  2. ·        Non-participating whole life insurance
  3. ·        Economic (whole Life Economic)
  4. ·        Single premium whole life insurance
  5. ·        Indeterminate premium whole life insurance
  6. ·        Interest sensitive whole life insurance
  7. ·        Level premium whole life insurance
  8. ·        Limited payment

Participating Whole Life Insurance: This offers the policy holder an opportunity to have an increase cash value from the policy because the policy holder is eligible for dividend payments from the insurance company. If the insurance company account performs well, the participating whole insurance account will additional cash payments as a result of increase. But this policy usually have a higher cost due to the additional cash payments.

·     Non-Participating Whole Life Insurance:This policy is usually simple and low in cost, it involves a fixed death benefit, level premiums, and a guaranteed cash value over the policyholder’s life. In other words, non-participating whole life insurance means the policy holder does not participate in the investment activities of the insurance company. This company. This policy is a low risk proposition for policy holders which definitely means little potential for growth.

·     Economic Whole Life Insurance:In this type of whole life insurance plan, the policy holder receives additional death benefit as time goes by. But when the insurance company’s investment do not perform well due to economic melt-down, the policy holders death benefit might actually go down with it not necessarily within that period of economic instability

·     Single Premium:In this plan, the policy holder pays up front the total amount of the policy premium. This plan is mostly needed for investment purpose since the buyers need to have relatively large amount of money at hand in order to make the single payments. But one disadvantage with this plan is that these policy holders have significant fees they have to pay if the eventually decides to jettison their policies during the first few years.

·     Indeterminate premium: This plan allows for policy holders to pay a variable amount which depends on the company’s financial performance instead of making the same premium payment every month.
      Interest Sensitive: In this plan, the interest on the policy’s cash value fluctuates according to market conditions. As the insurance company makes profit, you make higher gains and vice versa. The death benefit is constant for life but the premium cannot increase more than what has been stipulated in the policy. This can be advantageous for those who want to secure a “guaranteed death benefit” while looking forward for higher gains in their cash value.

Level Premium: This plan is common and widely accepted, the premium are calculated based on the full duration of the policyholder’s life (up to 95 or 100) and the policyholder pays an equal premium every month or probably his life period. This plan gives the policyholder full stability and assurance in knowing exactly how much he/she will be having on the premium each month and the premiums never increases.

      Limited Payment: This is the opposite of the level premium where you would rather have not to pay a monthly premium but a full payment premium in a shorter time frame let’s say 10 or 20 years and this insurance policy is paid off and cannot be voided but one thing about this premium is that is quite higher than level premium plans because of compressed payment schedule. 

            Have you read TERM LIFE INSURANCE, READ HERE

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