There are plenty of life insurance products in the market. Every day, newer products hit the market. But whole life insurance continues to be industry staple. While the newer products address a range of consumer needs, whole life insurance has its own advantages over these newer products. A whole life insurance policy is one can keep for as long as you live and that will pay the face amount to your beneficiaries. The insurance remains in force for life unlike term insurance policies which remain in force only for a specified period. Over the years, whole life insurance has been maligned. Many see it as an outdated product which lacks the flexibility of the newer insurance products available in the market today. The biggest advantage of whole life insurance is the guarantee and security not found in universal life insurance and variable life insurance policies. While these policies base mortality and expense costs on an increasing schedule, whole life insurance extends the policy’s death benefit to an advanced age. Whole life premiums are guaranteed, fixed and level for life.
In most life insurance products, especially the newer ones, the insurance companies have been shifting mortality and investment risks to the consumer. In whole life insurance, the company assumes these risks. Whole life insurance charges premiums in advance, based on the level-premium concept. If premiums are leveled out, premiums paid in the early years exceed current death claims; those paid in the later years are less than adequate to meet claims. The insurance company invests the net premiums beyond those needed for death claims in the early years and holds the investment in trust to meet future obligations. The investment becomes part of the face amount payable on the death of the insured.
Whole life insurance is best used as an insurance policy to protect your loved ones from funeral costs and final expenses. If your payments lapse because of your death, which is discovered later, then your whole life insurance policy is considered valid and comes into effect to protect your family from the costs associated with your death. Whole life insurance provides affordable insurance protection at the uppermost limits of the human life-span. The level-premium plan protects the insured against the consequences of “living too long” and having to pay prohibitive increases in premiums. Generally there are two types of whole life insurance policies: participating and non participating. A participating policy has cash value and earns dividends if the life insurance company performs efficiently, but dividends are not guaranteed. A non participating policy has cash value. It does not pay dividends. Whole life insurance offers a measure of safety of principal, yield and liquidity based on a conservative and diversified portfolio of investments and provides a peace of mind to the insured.
