Whole life insurance policies provide long-term protection. Your premiums will be based on your age, so the younger you start your policy the better. You whole life insurance policy premiums will stay level with this policy type. Because the premiums stay level, the yearly premium cost is much more expensive. Besides the long term protection, another benefit of permanent life insurance is that you can borrow against it.
The proceeds of many whole life insurance policies can be used to ease the financial burden of serious illness, terminal illness, or long-term care. These accelerated benefits may be offered as part of the basic policy or as a rider to an existing policy.
Whole Life Insurance Types
Whole Life Insurance
This whole life insurance policy is also known as your main type of “life” policy. This policy has a fixed rate and develops a cash value over time with regular premium payments.
There are two variations on traditional whole life:
Survivorship Life: The policy insures two people and pays a death benefit only when the second person has died. It is designed for married couples who want to provide funds to pay estate taxes that may be due after their deaths.
Joint Whole Life: The policy insures two lives instead of one. Also called first-to-die coverage, the policy pays the death benefit to the surviving insured person when the first one dies. This is usually purchased by married couples.
In this policy, you may change the death benefit and/or the amount of premium and payment frequency. Unlike whole life, this is an “interest driven” policy, which normally pays a minimum guaranteed interest of 4% to 4.5%. If the interest rates are continuously low, additional premiums may have to be paid to avoid a lapse of coverage.
This policy has death benefits and cash values that vary with the outcome and growth of an underlying investment portfolio. The death benefit and cash value are not guaranteed. They can go down as well as up, although there may be a guaranteed minimum death benefit.
This policy combines the premium and death benefit flexibility of universal life with the investment flexibility and risk of variable life.