Definition of Whole Life Insurance Articles | Life Insurance Tips

Would you benefit from buying a whole life assurance policy? If you think that you may need life cover for when you are 70 years and older, you may consider this type of life cover policy. We can now take a quick look at some of the basic features of a whole life insurance cover policy.

A Definition Of Whole Life Insurance

Whole life cover offers death protection for the whole lifetime of the insured person. A whole life assurance policy has two parts. The mortality charge is the first part of your premium that pays for the insurance coverage. The second part or rest of the premium goes toward an investment component that earns interest. When the contract holder dies, the insurance payout is made to the contract's beneficiaries.

The Whole Life Insurance Premium

The policyholder typically pays a level premium for a whole life cover policy. This is a premium which does not go up as the person ages.

The Whole Life Insurance Investment

A whole life policy incorporates an investment component. This gathers a cash value that the policyholder can withdraw or borrow against. Life assurance companies traditionally invest insurance premiums in stocks, bonds and real estate in order to create boosts in cash value for policyholders. The policy's returns may rise and fall with the markets. It will typically gather less returns than those available from other investments such as equity mutual funds.

Whole Life Insurance Dividend Paying

Insurance Companies may credit the investment part with an annual dividend in addition to interest. This will depend upon the insurer's loss experience and investment performance.

The Cost Of Whole Life Insurance Whole life cover can be really expensive. You may not be able to afford all the insurance coverage you need if you are on a tight budget.

Other Whole Life Insurance

There are several types of whole life assurance policies. Here are 7 traditional forms:

Non-participating: The death benefits, cash surrender values and premiums of the policy are determined for the life of the contract when the policy is issued. It cannot be adjusted afterward.

Participating: With this policy the insurance company shares any surplus profits with the policyholder. These are the dividends the company may add to the policy investment.

Limited pay: Premiums are only owed for a certain number of years instead of paying annual premiums for life.

Single premium: The premiums are limited to a single large payment at the beginning of the life cover policy.

Indeterminate premium: The premium may differ from year to year, but it can never exceed the maximum premium guaranteed in the policy contract.

Economic: This is a combination of participating and term life cover. A part of the dividends is used to pay for additional term life cover.

Interest sensitive: The interest on the cash value of the policy fluctuates with current market conditions.

The Whole Life Insurance Guarantee

A life cover company will normally guarantee that the cash value of the policy will increase in spite of the performance of the company or the amount of death claims it receives. We have now finished taking a quick look at the definition of whole life insurance as well as some of the general aspects of whole life cover.