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Deciding On Whole Life Insurance Products

By Compuquotes Team on June 21st, 2008

As if deciding between whole life insurance and term life insurance wasn't complicated enough, there are even more decisions to be made if you opt for whole life insurance. Whole life is more than just protection for your family in case of your death or disability. Most types of whole life insurance are also investment vehicles that allow you to build cash value for the future. Some even pay dividends. Here's a quick rundown of the various types of whole life insurance policies that are available on the market.

The two broad categories of whole life insurance are participating whole life insurance and non-participating whole life insurance. Within those categories are the following sub-categories of whole life insurance.

  • Level Premium Whole Life Insurance

Typically, life insurance premiums increase as you age to account for the rising risk of your death. Level premium life insurance is exactly what it sounds like. Your premium payments are fixed for the entire life of your policy. In the earliest years, you'll pay higher premiums than you would for traditional whole life, and the excess premium, including interest on the excess, makes up for the later years when your premium isn't enough to pay for the annual cost of your insurance. The extra premiums are also invested by your insurer, adding to the cash value of your policy.

  • Limited Payment Whole Life Insurance

Likewise, with a traditional whole life policy, you'll pay premiums throughout your life as long as you want your policy to remain in force. Limited payment whole life insurance offers protection for your entire life with a limited number of payments. Since you won't be paying insurance throughout your life, the premiums that you pay will be considerably higher, but it can be a good option if you want to ensure coverage in later years when you may not be able to afford to pay regular premiums. Limited payment premiums may base your number of premiums on a fixed number of years - for example, 10 payment whole life insurance, or it may be based on age, as in whole life paid up at age 65.

  • Single Premium Whole Life Insurance

Single premium whole life is limited payment whole life insurance taken to the extreme. You pay for the policy in a single installment, due at issue of the policy. Since the premium amount will be substantial, a single premium whole life policy will have immediate cash and loan value, and is generally considered an investment vehicle.

  • Indeterminate Premium Whole Life Insurance

An indeterminate premium whole life policy is also sometimes called an adjustable premium policy. It's a typical whole life insurance policy that requires premium payments throughout your life, as long as you want it to remain in force. Generally, your premium payments will be less in the early years, since the current premium will be based on the company's current estimate of earnings, mortality and expense costs. The premium will change as the costs change. Indeterminate premium life insurance policies will also state a maximum premium which will not be exceeded during the life of the policy.

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