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Whole Life Insurance Policy – Meaning and Types

    Do you need life insurance coverage? A whole life insurance policy is the ideal option for you. I am sure you might be wondering what a whole life insurance policy is. But not to fret, I will provide all the details you need. Life insurance is essential for every individual. It protects your family members from any financial loss if something happens to you.

    Whole Life Insurance Policy - Meaning and Types
    Whole Life Insurance Policy – Meaning and Types

    What is a Whole Life Insurance Policy?

    Whole life insurance is a long-lasting life insurance policy. It provides lifelong death benefit coverage for the policyholder. When you buy life insurance coverage, the insurance company agrees to pay your family or other beneficiaries the full amount of money when you pass on.

    This insurance policy gives you the option to pick your coverage amount. You will get a quote based on certain factors like gender, health, and age. Effective payment of premiums will lead to your whole life coverage staying in effect and the premiums will stay the same irrespective of your age or health.

    A whole life insurance policy doesn’t expire. The policy remains effective up until the policyholder passes on. Furthermore, as time goes on, the premiums paid into the whole life insurance policy turn into cash value. The cash value can be used in specific conditions.

    The cash value can also be taken out as a loan, and it can also be used to cover other expenses. However, the loan amount must be paid in full before the policyholder proceeds. Failure to do so leads to a deduction of the policy benefit.

    Types of Whole Life Insurance Policies

    Before buying a whole life insurance policy, you might want to get familiar with some of the options available to choose from. In this segment, I will break down the different types of whole life insurance policies.

    Typical

    This insurance policy offers level premiums that ensure your rate remains the same for the term of the policy. The insurance policy stays effective till the policyholder passes away, as long as the premiums are paid. This insurance policy turns into a cash value that increases for as long as you have the policy.

    Survivorship

    This type of insurance policy is best for couples. It is joint insurance coverage. This type of insurance policy insures both the couple and does not pay the benefits until the couple passes away. The child of the parents gets the cash benefit when the parent passes on.

    Single Premium

    For you to buy this type of insurance policy, the policyholder must pay a certain amount of money to trade a death benefit. For example, you can pay $30,000 for a $60,000 death benefit. The amount you pay determines the amount of the death benefits your beneficiary receives.

    Universal Life

    In this type of insurance policy, there are adjustable premium payments. The payment depends on the amount of the insurance, which includes mortality charges and administrative fees. The cost of insurance depends on the health and age of the policyholder.

    With time, the price of the premium increases as the policyholder ages. The amount paid above the price of insurance is added to the cash value of the insurance policy.

    Limited Payment

    The premiums can be paid for a specified period of time for this type of life insurance policy. Policyholders can choose between 5, 10, 15, or 20 years to pay for the premiums. By choosing this type of insurance policy, you wouldn’t need to pay premiums for a long period.

    Whole Life Insurance VS Term Insurance

    Unlike whole life insurance, term insurance offers death benefits for a certain amount of time. It doesn’t have a saving factor. Once the term ends, the insurance policy is eliminated. However, some insurance companies allow the policyholder to turn the term policy into a whole life insurance policy.

    Whole life insurance is a lifelong insurance policy that offers coverage for the life of the policyholder. This type of insurance policy can also generate cash value.

    Best Whole Life Insurance Companies

    The insurance company you choose is very important when you want to buy a whole life insurance policy. Some of the best life insurance companies provide the best customer service and they offer the best insurance policy buying experience.

    • State Farm Life Insurance
    • Guardian Life
    • Nationwide Insurance
    • Ethos
    • New York Life
    • Northwestern Mutual
    • AARP
    • MassMutual
    • Globe Life

    These are some of the well-known insurance companies. They are famous for offering the best customer service as well as lots of perks with their insurance policies.

    How Much Does Whole Life Insurance Cost?

    A whole life insurance policy is a lifelong policy that offers long-lasting protection as long as you pay your premiums. The cash value and the amount of the death benefits put together lead to higher premiums.

    The premium may also increase due to dividends and riders because they offer extra coverage and protection. Dividends can be used by policyholders to make payments for premiums and to reduce other expenses. 

    The cash value earnings can pay for the monthly premiums. However, it is necessary to bear in mind that the cash value is not available straight away. Most of the time, it takes up to three years for the policyholder to have access to the cash value through loans or withdrawal.

    Are Whole Life Insurance Policies Worth It?

    Yes, they are. Whole life insurance policies are an excellent option for individuals who prefer long-lasting coverage. It is also an amazing option for people who don’t want the premiums to change and want to make more interest through a cash-worth component. However, the whole life insurance policy is more expensive than term life insurance.