Whole Life Insurance is the simplest form of “permanent” life insurance. Whole life insurance typically features life-long protection with level premiums, guaranteed death benefits and cash values. The amount of any guaranteed cash value depends upon the kind of permanent whole life insurance policy, its size and how long you have owned it. Generally, any borrowed amounts reduce the death benefit and cash surrender value.
Whole life insurance may be a good choice for those with long-range insurance and financial goals. Whole life insurance can provide the security of a policy that will never expire and also serve with a tax-advantaged vehicle suitable for reaching and managing many financial goals.
There are many things to consider before you select a whole life insurance policy, including which types of whole life insurance plans are available, associated whole life policy benefits and which whole life insurance company is best-suited to provide your policy. Additionally, whole life rates can vary from company to company, so we strongly encourage you to use our service to make your whole life insurance decision easy and reliable.
Texas Senior Benefits can help you decide if a whole life insurance policy is right for you.
Features of Whole Life Insurance:
- Level Premiums – premiums are guaranteed to remain level for the life of the policy.
- Lifetime Benefits – provides life insurance benefits for as long as the policy premiums are paid timely and remains in force.
- Cash Value – accumulation of cash value in addition to life insurance benefits.
- Policy Loans and Withdrawals – allows you to borrow against your policy cash value. Upon surrender, the cash value (less any loans or withdrawal amounts) would be available to you.
- Tax Deferred Growth– the growth in cash value account is tax-deferred under current federal income tax law.
- Tax Free Death Benefit – life insurance proceeds are generally paid income tax free to the beneficiary.
- Avoids Probate – like most other life insurance products, the death benefit typically avoids probate costs and delays.
- Dividends – not guaranteed, but some whole life policies may pay dividends in years the carrier is profitable.
- Customizable – most whole life insurance policies offer the ability to customize the policy by adding optional riders and features such as long term care, terminal illness, etc.
Types of Whole Life Insurance:
- Participating – Company shares the excess profits or dividends with the policyholder. Typically these refunds are not taxable because they are considered an overcharge of premium. For a mutual life insurance company, participation also implies a degree of ownership of the mutuality.
- Indeterminate Premium – Similar to non-participating, except that the premium may vary year to year. However, the premium will never exceed the maximum premium guaranteed in the policy.
- Economic – A hybrid of participating and term life insurance, in which a part of the dividends is used to purchase additional term insurance. This can generally yield a higher death benefit, at a cost to long term cash value. In some policy years the dividends may be below projections, causing the death benefit in those years to decrease.
- Limited Pay – Similar to a participating policy, but instead of paying premiums for life, they are only due for a certain number of years, such as 20 years. The policy may also be set up to be fully paid up at a certain age, such as 65 or 80. The policy itself continues for the life of the insured. These policies would typically cost more up front, since the insurance company needs to build up sufficient cash value within the policy during the payment years to fund the policy for the remainder of the insured’s life.
- Single Premium – A form of limited pay, where the pay period is a one-time single payment.
- Interest Sensitive – Also known as excess interest or current assumption whole life. These policies are a mixture of traditional whole life and universal life. Instead of using dividends to supplement guaranteed cash value accumulation, the interest on the policy’s cash value varies with current market conditions. Like whole life, death benefit remains constant for life. Like universal life, the premium payment might vary, but not above the maximum premium guaranteed within the policy.
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