Introduction
Insurance life whole is a life insurance policy for which a person has to pay premiums every year of the policy. There are numerous types of insurance life whole policies, interest sensitive whole life being the newest one. Some of these types are as follows:
- Non-Participating
- Participating
- Indeterminate Premium
- Economic
- Limited Pay
- Single Premium
- Interest Sensitive
Insurance life whole requires a person to pay premiums for life of the policy. There are some ways to make the policy “paid up”, which means that the person does not have to pay premiums to the policy. It can be done in even 5 years or at a single time by paying a large premium. Usually, if the person doesn’t pay a large premium in the beginning of the insurance life whole contract then he is not allowed to pay one afterwards. However, some insurance life whole contracts allow the person to pay a large premium afterwards if he pays a fixed amount of extra money on a regular schedule.
Detail
Usually, the company guarantees the owner of the insurance life whole policy that its cash value will increase no matter what the performance of the company is or what its experience with death claims is. The dividends can be given by three methods. The insurance company can give the owner of the insurance life whole policy a cheque, the premium payment can be decreased by using the dividends, or the insurance life whole policy owner can reinvest the dividends into the policy so that the death benefit and cash value can be increased at a faster rate.
Features
The cash value of the insurance life whole policy can increase at a really significant rate if the insurance life whole policy owner decides to reinvest the dividends paid on the policy back into the policy. This increase is dependent upon the performance of the company. The cash value will increase tax-deferred with compounding interest. A person can surrender insurance life whole policies at anytime to get the cash value amount. In this case, the income taxes will be placed only on the amount which is more than the total premium paid. Hence, insurance life whole policies are used by most people as a means of money when they retire rather than for risk management.
Comments
The cash values are very liquid. If a person is so financially stable that he can make premium payments then he can use the cash values for investment (Single premium insurance life whole policies make sure that the insured make his premium payments and they are also liquid enough that they can be used as collateral. In a single premium insurance life whole policies the insured has to make a premium payment only one single time which is usually lower than the split payments.) There is no tax placed on the cash value which is equal to the total amount of premiums paid, and the rest may be get tax-free if it is taken in the form of a policy loan.
