Whole Life Definition

Whole life insurance is a permanent insurance that provides level premiums and lifetime protection. Three basic types for whole life insurance are straight, limited-payment or single pay life insurance. Straight life provides lifetime protection to for example age 120 with premiums paid till then or dies by then. Limited-payment requires payments to a certain age (such as 65) or a certain number of years (such as 10 years) for lifetime coverage. Lastly there is the single pay option. You pay one time for lifetime coverage where the benefit is always for more than the cost of the policy which is a great way to leave money to heirs tax free.

At some point the cash value will mature at which time the cash value will equal the face value and become payable as a living benefit. This could also be age 120. At this time the policy is said to endow and will be paid out. All whole life policies accumulate cash value considered by some to be a forced savings account. Whole life is my favorite type of insurance because it is for life.

Protecting Estate Assets

If an estate is large enough, it may be subject to substantial amounts of estate taxes when the insured dies. Not only does this take away from value of the estate which may be passed on to heirs, it may even force the liquidation of assets in order to pay the required estate taxes. In this case it could mean much less will be left for the heirs. It is quite common for a successful person to purchase a large amount of life insurance for this reason. This is a tax free pay out.

Advantages of Whole Life

Permanent insurance with level face amount as a death benefit for the whole life of the insured.

Level Premiums so the insured never has to worry about price increases. It will never change for the whole life of the insured.

Protects against premature death and accumulates cash value savings that can be used later in life for multiple purposes.