What is Whole Life Insurance?
A. Whole Life insurance is a “permanent” form of life insurance that combines life insurance with cash value savings. The cash value accumulation, which is largely attributable to the effect of interest over time, is not taxed as it accumulates. There are various optional riders that can be added. Contracts vary between insurers. Premiums are typically paid for life or to age 100. Premiums are usually level based on the age at purchase. If coverage is surrendered, cancelled or lapses after being in effect for a few years, there generally is a cash value that provides the insured with various options. The policyholder can usually borrow their accumulated cash value to keep coverage in force in lieu of surrendering. They need to pay interest on this policy loan since the borrowed funds are not available for investment by the insurance company. In event of death, any un-repaid policy loan would be deducted from the proceeds paid to the beneficiary. These would include using the funds for
This is life insurance that remains in force during the lifetime of the insured, provided premiums are paid as specified in the policy. Whole Life provides a guaranteed premium, a guaranteed death benefit, and a guaranteed cash value. While a Whole Life policy is in force you may take out a policy loan against the cash value or receive the cash value (less any policy loans and accumulated interest) should you need to surrender the policy. In addition, a Whole Life policy can pay dividends, which may be used to enhance both the death benefit and the cash value or may be used to reduce your premium payment. Dividends are not guaranteed and policy loans accrue interest and reduce the death benefit. For more information about Whole Life please click here.
