Whole life insurance is an insurance policy whose term is the rest of the life of the person insured. 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. It is more advantageous than a term life insurance policy if you are seeking long term protection. Term life insurance protects you only for a specified period of time whereas whole life insurance protects you for your whole life. It is more costly than term life insurance but here are different variations of whole life insurance. Some of them may just fit your requirements and budget.
Variations based on mode of premium payments
Whole life insurance policies can vary based on how the premiums are paid. In most whole life insurance policies, the premium is paid annually but there are other ways to for a whole life insurance depending on the insurance company. In single premium policy, the premium is paid only once but the policy has cash value and remains in force until your death. In a graded premium policy, initially the premium is much lower than the normal amount and increases every year for a specified period when it levels off and remains level for the rest of the life of the policy. Depending on the insurance company, the premium generally increases for 5 or 10 years. There is also limited payment whole life insurance where the premium is paid only for a specific period of time but you still own your policy for your entire life. The cost of the policy is packed into the specified period. The policy continues to have cash value and earn dividends after the specified period. In an indeterminate whole life insurance policy, the premiums could possibly vary from one year to the other. A limited pay whole life insurance policy limits the number of years that premiums need to be paid.
Variations based on payment of dividends
If your whole life insurance policy pays dividends, it is a participating policy. The dividends are not guaranteed. You can decide how the insurance company pays the dividends. A non-participating policy does not pay dividends. Both participating and non-participating policies have a cash value component. In non-participating whole life insurance, all values related to the whole life insurance policy are already determined at the time of the issuance of the policy.
