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Whole life insurance an overview


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Whole life insurance an overview

  1. 1. Whole life insurance: An Overview
  2. 2. One of the general types of life insurance is the whole life insurance. Another name for this is the whole of life assurance. Anent to this, it deals with the whole life of the insured party. Most insurance companies require the policy insurance holder to pay premiums annually.Originally, insurance companies only cover temporary life insurance policies such as the term insurance. This type of insurance covers only a fixed period of time. In addition, upon the death of the insured person, a beneficiary can step in and claim the benefits due to the insured person. One setback of term insurance is that some people are paying it over 2-3 decades. After which, they will never have a benefits after retirement because they have already used it.
  3. 3. In this regard, whole life insurance was made. To fix the setback, whole life insurance covers the whole life or the entire lifetime of the insured person in terms of cash value. The cash value then acts as a cash reserve. In addition, the benefits due to an insured person usually starts when he reaches the age of 95 and beyond. In addition, if the insured person has died, then the beneficiary will have a valid claim on the benefits. This is one way to provide protection to the children of the policy owner.However, there is another option available to the insured person in terms of the whole life insurance. This option involves the withdrawal or borrowing of the cash value of the insured person. An interest less the paid dividend will then be paid by the insured person.
  4. 4. According to the state of New York, whole life insurance has 6 classifications. However, not all insurance company adhere to the 6 classifications. These 6 classifications under the whole life insurance include:• Participating. In the United States this is also called par or with-profits policy. In this type, there is sharing of excess profits between the insurance company and the policy holder. The excess profit or dividends do not have tax since it is the overcharge of the premium.• Economic. This is a mixture of the term life insurance and the participating type of whole life insurance. In this type, a fraction of the dividend is use to buy another term insurance. Therefore, the policy holder can expect to have an increase in terms of death benefit which can be translated to cash value.
  5. 5. • Limited pay. This is similar with the participating type. However, the difference lies in the length of coverage. In participating policy, one can get insurance for a lifetime. However in the limited payment, the coverage is only for a specific period of time such as 25 years.• Single premium. This is similar with the limited pay. However, payment is made once and in bulk.
  6. 6. • Non-participating. In this type, terms and conditions related to the policy has been discussed and finalized. It can never be change. Therefore, the insurance company is the sole responsible party about future claims.• Indeterminate premium. This is quite similar with the non- participating type. However, the difference lies in the premium since it may differ yearly.