subject: Types of Whole Life Insurance – What are the Different Types of Whole Life Insurance? [print this page] Types of Whole Life Insurance What are the Different Types of Whole Life Insurance?
You will find several types of whole life insurance available on the market today. They can go by different names in different areas, but here are the basic forms and their descriptions. The first is non-participating. This form of whole life insurance holds the death benefits, cash surrender values, and premiums at a fixed amount set at the time the insurance company issued the policy. This form of insurance places the financial risk on the insurance company. If they underestimate claims, they cover the difference. But, if they overestimate them, they get to retain that difference.
The next type of whole life insurance is participating. This type of policy gives the policyholder the ability to collect dividends. The insurance company invests the cash value of the policy. If that investment pays dividends, the policyholder can reap the rewards. But, dividends are not a guarantee. The third type is an indeterminate premium policy. This is very similar to the non-participating policy. The main difference is that the policy does not fix the amount of the premium. It only guarantees a maximum amount the insurance company can charge in a given year. The insurance company can vary the premium year to year.
Economic policies are another form of whole life insurance. These policies also have the option of paying out dividends. But, instead of the dividends going directly to the policyholder, the insurance company uses those dividends to purchase term life insurance. This increases the potential death benefit. However, because there is no guarantee on dividends, there is no guarantee on the increased death benefit. A limited pay policy is another type of whole life insurance. Instead of paying premiums for the entire life of the named insured, the policyholder only needs to pay for a predetermined period. Sometimes it's for a 20 or 30 year period. Other times it works to pay off at a particular birth date.
Another type of whole life insurance is a single premium policy. This policy involves making a single large payment at the beginning of the policy. This avoids the need to pay premiums going forward. The final type of whole life policy is interest sensitive. This form of policy uses current market conditions to calculate the guaranteed cash value of a policy. These many forms of whole life insurance can confuse many. It is important to speak with an insurance expert before buying a policy.
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