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Whole Life Insurance Premium Options

By Tes Kurtz on December 21st, 2009

When you purchase a whole life insurance policy there are several premium payment options to choose from. Depending on your needs and financial goals you might select set premium payments, a single lump sum payment, or another premium option that is available.

Here are some of the whole life insurance premium payment options:

  • Level premium
  • Single premium
  • Indeterminate premium
  • Limited payment premium

Level Premium

Level premium is the most common payment option for a whole life insurance policy. For level premiums, your payments are generally the same for the life of the policy. At first, this level premium exceeds the amount needed to cover the cost of insurance protection. But as time goes on, and you grow older, the cost of your insurance protection increases. The surplus premium amount of the early years, plus the interest earnings, make up premium deficiencies in the later years of your policy.

Single Premium

You can make one lump sum payment when your whole life insurance policy is issued. The result?

  • Guaranteed death benefit that is fully paid up front
  • Immediate cash value and loan value

Since your policy is fully funded with this option, the cash invested builds fast. With other premium payment schedules your cash invested accumulates more slowly and must build over a longer period of time.

The death benefit for your single premium policy depends on how much money you invested, as well as your age and the status of your health when the policy is issued.

Indeterminate Premium

An indeterminate premium option has an adjustable payment schedule, and remains adjustable throughout the life of your policy. The adjustments are made based on the insurance company's expenses, mortality rates, and investment earnings.

When you initially purchase an indeterminate premium whole life insurance policy, your contract specifies a guaranteed maximum rate and a minimum premium rate. The maximum rate is set so that your premium will never exceed it. The lower premium level is set for a specified period of time. The insurance company establishes a new rate when the initial term expires. The new rate could be higher than your initial premium, but it could also be lower.

Limited Payment Premium

Limited payment premiums provide immediate benefit protection but have a condensed number of premium payments. The payments might be made over 20 years or until you turn 65 years old. You will make fewer payments compared to a level premium whole life policy, but the premium rates are likely to be higher.

It is wise to be aware of all of your payment options as you investigate whole life insurance policies. Compare quotes from multiple insurance companies to choose the best policy for you and your family. Just enter your zip code to get started.

Source :
George D. Lambert • A Look At Single-Premium Life Insurance • http://www.investopedia.com/ " http://www.investopedia.com/articles/pf/05/SinglePremLife.asp?viewed=1
N/A • Whole Life Insurance and the Benefits of Cash Value • http://www.compuquotes.com/http://www.compuquotes.com/whole-life-insurance-and-benefits-cash-value.html

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