Whole Life insurance

Whole life insurance is considered as the ideal plan when coverage is required for your lifetime. It offers a premium that will never change for your lifetime, can be paid for over a shortened period, e.g. 10, 15 or 20 years, and most plans build up a cash value that can never be reduced once allocated to the policy. This cash value can be borrowed or used as collateral for a loan from a lending institution.

Whole life insurance is designed to provide coverage when the insured dies to help with ongoing expenses and provide income for loved ones. It is also used for paying estate taxes, and tax advantaged charitable giving, estates for children and grandchildren. Business owners also use it for several tax saving and wealth preserving strategies. It provides a guaranteed amount of insurance at a guaranteed price. Depending on the type of whole life insurance it can also provide an increasing amount of life insurance and safe returns on the savings portion of the monthly or yearly deposits.

PARTICIPATING WHOLE LIFE

These policies include an annual dividend based on the financial performance of the investments that the money paid by these policy holders achieves. Consequently, the face value of the policy will increase over the years if the policy holder chooses not to take the dividend as a cash payout which is one of the options but is seldom done.

There is also a difference in how insurance companies pay dividends. Most insurance companies are stock companies or publicly traded companies whose shares are listed on stock markets. In this case, the profits flow to the benefit of the shareholders.

NON-PARTICIPATING WHOLE LIFE

Non-participating whole life insurance policies guarantee the premium, cash values and amount of coverage beneficiary will receive. All insurance companies provide an illustration that includes this information and the illustrated values are fully guaranteed. Usually it is for a set amount of life insurance and the face value does not increase unlike participating policies. It will contain a cash value, and this is a guaranteed cash value that can be retrieved as a policy loan or if you collapse the policy (tax consequences).

Non-participating whole life policies are commonly used to provide for final expenses and they tend to be of smaller face values which make them more reasonable for seniors and retirees.

These policies can be paid off in 10, 15, 20 years or paid up at age 65 years depending on the age of the insured. Obviously the quicker it is paid off, the higher the premium but the return on the higher premium can be significant as the cash values increase at a much faster pace.