What is Whole Life Insurance?

By November 6, 2018 January 15th, 2019 Whole Life Insurance

What is Whole Life Insurance and how does it work?

What is Whole Life insurance? Let’s just have a quick overview of what whole life insurance is.

Whole Life Insurance is a type of permanent insurance. The policy is guaranteed to remain in-force forever just as long as you pay premiums. Whole Life also has a savings component called cash value, that the policy owner can access at any point in time.

The main feature of this policy is that you have multiple guarantees on the death benefit, cash value and premiums.

Guarantees on a whole life insurance

  • Death Benefit: The death benefit will be there forever as long as you pay the premiums.
  • Premiums: Premiums on a whole life are guaranteed to never go up.
  • Cash Value Growth: The cash value on a policy grows on a guaranteed basis.
  • Health Rating: Your health rating will always remain the same for the life of the policy.

Whole Life Cash Value

The cash value is one of the most important features in a whole life insurance. The cash value is a saving component of the policy that can be accessed at any time. The cash inside of a policy only goes up each year. However at the beginning of the policy there won’t be much cash value to access. Cash values have a guaranteed rate of growth, and some whole life’s have dividends on top.

Whole Life Insurance Dividends

what is whole life insurance

Some whole life insurance policies are participating, that means that they receive a dividend to help the growth of the policy. The most common participating policies are from Mutual companies. Some of these companies pay a dividend as high as 7.1%. This dividend get’s reinvested and the policy and you do not have to pay taxes as it grows.

Death Benefit

As I already mentioned the death benefit is guaranteed in a policy, however it can also grow each year as the policy matures. You have to understand that as long as the premiums are paid, the death benefit will remain in-force forever. The death benefit on all life insurance policies is tax free.

Paid up whole life insurance

Some policies have a feature that you will only have to make payments for a specific number of years. After you have completed the payments, your policy is paid-up, and your whole life will remain in-force forever without having to make any more payments. Typical time frames for a paid up policy are 10, 20 years and until age 65.

That was just a quick overview about whole life insurance and some of it’s features.

Related Articles:

Whole Life Insurance for Dummies

7 Lies about Whole Life

Participating Whole Life Insurance: Things to Know

Whole Life Insurance and the Biggerpocket Money Interview 

Whole Life Insurance can be a great tool in protecting your family and saving money for future goals. If you would like to compare the best companies just run a quote here: Whole Life Insurance Quotes

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