Whole Life Insurance: Coverage types and benefits

Submitted by Anonymous (not verified) on Tue, 10/23/2007 - 18:31
If you want to insure your life for a permanent period then whole life insurance is the one we are talking about. You may purchase a whole life insurance policy depending on your age and health. This insurance provides whole life coverage for you and not just for a specific period.

A whole life insurance does not just enable you to save money for the financial security of your family from the money that you pay as premiums, it also builds cash value. This cash value is a return on a portion of your premiums that is invested by the company. Until you withdraw the cash value it will be tax-deferred.

When should you buy whole life insurance coverage?

You should buy whole life insurance when you want to ensure a life insurance policy to provide financial protection for your family. The premium that you choose to pay must be affordable by you or should fit the outline of your estate or your retirement plan. The premiums that you pay for whole life insurance can be far more expensive than what you pay for a term insurance of the same value. However, the amount that would accrue in case you were to renew your term insurance policy until your later years would be greater than what you pay for a whole life insurance.

If your need for insurance is lifelong or permanent, you may get whole life insurance. Your whole life insurance builds up a cash value within the policy which is an addition to the premiums that you pay for the future. For more click here.

What are the types of whole life insurance?

Whole life insurance is categorized in to 6 main types:
  1. Non-Participating Whole Life Insurance: Such a policy has a level premium and face amount during the tenure of your life. The fixed costs and the comparatively low out-of-pocket premiums are an advantage. However, since this policy is categorized as non-participating, it does not pay you any dividends.

  2. Participating Whole Life Insurance: You will receive dividends here that represent the profit of the insurance company and this may be paid in cash. However, these dividends are not guaranteed to be paid to you.

  3. Level Premium Whole Life Insurance: In such a plan the premium payments are level and are required to be paid throughout the insured's lifetime. In its initial years the premium is more than enough to pay the current amount required to get insurance protection. The interest earned as well as the excess that remains make up for the later years when the premium paid annually may not be able to cover the cost of insurance. The extra premiums that are generated are held by the insurer and thus the cash value of the policy is created.

  4. Limited Payment Whole Life Insurance: Such a plan offers you life time protection and with a limited premium too. However, since the premium payments are for a shorter period of time, the amount paid each time will be higher compared to a general whole life insurance premium. This plan can be based either on the number of years that a premium has to be paid or the age limit till which the premium will be paid.

  5. Single Premium Whole Life Insurance: This plan includes coverage for the entire lifetime of the insured with one large premium payment. Due to its nature this policy has an immediate cash value and loan value that may be significant in relation to the amount of single premium payment.

  6. Indeterminate Premium Whole Life Insurance: Except the fact that this policy provides for adjustable premiums, it is similar to an ordinary life insurance policy. There is a current premium charged on the basis of company’s current investment earnings, mortality and expense costs. The company will change the premium in accordance with the changes in the mentioned estimates of the company but that will never go beyond the maximum guaranteed premium stated in the policy.
Many a times you may also wonder whether whole life is better than term life. For more knowledge click here.

What are the benefits of whole life insurance?

Whole life insurance benefits include the following:
  • The investment that you make in a whole life insurance is divided into smaller more specific investments. A portion of your premium goes towards the insurance portion of your policy, a portion towards administrative purposes and the remaining amount will go towards the cash portion of your policy.

  • The cash value that is accrued in this life insurance plan belongs to the policy holder.

  • The cash value can be taken out in the form of policy loans. You may even cash the policy in.

  • The interest accumulated through your policy is tax-deferred until the time you withdraw it.

  • This cash value can also be used later to pay your premiums. In case of unexpected expenses you may even stop or reduce your premiums (conditions apply). The cash value accrued can be then used to pay the premiums.

  • The premiums for whole life insurance are fixed. No matter what your age or sex is the insurance company fixes a particular amount as premiums for you to pay each year.

  • If you take a whole life insurance policy early in life, you have a god chance of getting a substantially built up lump sum amount at the time of your retirement and hence secure the future of your children. You may even use this money for their education.

  • If your life insurance policy has sufficient accumulated capital, you may also use it as loan repayment option for the bank.
Whole life insurance enables you to secure the future of your loved ones. You will not always be with your family to protect them from harms end. But keeping them financially secured even when you are not around to provide for them is doing a great deal for them. With a whole of life insurance you can secure the education for your children. So if you are planning for long-term investment and looking for long-term profits for your loved ones, whole life insurance is a good idea.

I have a personal finance blog and I've written about Whole Life Insurance and how it is absolute garbage. 20 year fixed Term Life is the only way to go.

Posted: 23 Oct 2007 10:52 Post Subject: Whole Life Insurance

You bring up a very interesting point. Calling it "garbage" might be going a little too far though.
All the financial guru's tell everyone to always buy term insurance and invest the difference.
First of all, I don't feel that there is an "always" situation when it comes to insurance of any type, especially life insurance.
Some people don't believe in it at all and that, of course, is their privilege.
Secondly, in my years of insurance experience, I have sold many term life insurance policies, but I have seen very few policyholders who actually "invest the difference". If they have extra money they just buy something else, like a lot of us do.
Term insurance is just that, life insurance protection for 10, 20, or 30 years. But what if you want your life insurance policy to be in effect the day you die? I have advised a lot of families and business owners to design their life insurance programs so that it includes some term and some permanent (whole life). The term insurance will provide the most protection for the least amount of premium dollars while the kids are all still at home and the mortgage needs to be paid, the car payments need to be paid and so do the credit cards. The whole life policy will be in effect until the day the insured dies (as long as he/she pays the premiums) to pay the actual final expenses.
It is a very difficult situation to see someone buy a 20 year term policy at age 35, develop a heart condition at age 45, then have to make a decision as to what to do about the life insurance policy when he reaches age 55 (the term of the policy). What does this person do? If the term policy is renewable, the new premium will be 10 to 15 times the initial term premium. Is it convertible to a permanent plan of life insurance? What kind of new life insurance policy can a 55 year old person with a heart disease buy?
I have seen too many people get themselves caught up in what I call "the term trap".
Buying life insurance has to be a very personal decision made after all needs are analyzed and the best course of action for a person's individual situaton is presented.

Posted: 24 Oct 2007 07:39 Post Subject: how difficult things can be !

Yeah, thats more like it for a 55 year old, since he needs to trudge through the rough patches nearing the final quarter of his life. Now truly speaking, its quite difficult to get a lower premium irrespective of the fact whether the person possesses a heart attack or not! Thats the benefit that a person gets by obtaining a whole life policy right from the beginning. Hope you get that, PlasmaOptics56

Posted: 24 Oct 2007 08:04 Post Subject: Other ways!

Well, it can't be that people are not at all interested about the Whole Life policies now-a-days. Remember that its the whole life policy bearers who still constitute the biggest % of life insurance users. Now, in order to make your blog worthy of the current problems you need to mark out the recent trends very carefully. Apart from the I'd also like to mention that you have a nice opportunity of picking up issues relating to the UL, VL & SL (Survivorship Life policies). Now, if you would segregate the issues relating to the chore problems associated with each of these forms then you may find your blog as platform to launch remedial measures in those directions.

Thanks,
LAChauffer

Posted: 25 Oct 2007 03:40 Post Subject: Buying Insurance Online

Are you talking about researching an insurance company or actually buying an insurance policy online?
More and more people are buying everything, maintaining checking accounts, paying bills and doing just about all of their business transactions over the internet. I haven't made up my mind whether that's a good thing or not.
I would like to share with you some things you may want to think about when you are considering buying insurance online:

Are you really buying anything?
Sometimes when we go through the hassle of filling out all the information and hit "Apply", we are surprised by a popup message that says something like - "Thank you for your interest, an agent will be in contact with you within 48 hours".

Do you completely understand the product?
If you have no insurance experience, the answer to this question will more than likely be "No". There are so many provisions of any type of insurance policy, there are endorsements, exclusions, etc. No online site will probably completely explain the policy to you.

Is the company authorized to do business in your state?

Has the insurance product you are trying to buy been filed with your state insurance department?
It's the law.

Is the web site secure?
It's a good idea to review the site's "Privacy Policy".

Will your information be kept private?
Buying insurance requires a lot of very personal information from the person applying. Would you want this information shared or sold to someone else?

Who do you contact with your questions or concerns?
Even if you are applying with a major insurance company, once you have applied and been accepted, more than likely you will then be referred to someone's online service department.

Insurance can be bought online, but 70% of people buying homeowners insurance had rather do it on the phone or in person with a professional insurance agent. I don't have any statistics on the other lines of insurance.
There are over 400,000 insurance agents in the United States.

Posted: 25 Oct 2007 07:43 Post Subject: Term life insurance option

One form of term life insurance I have seen more and more of online in the recent past is term life insurance with no medical exam required.

This offers you level term life insurance with no medical exam and the rates and coverage amount remain the same for 10, 15, 20 or 30 years.

However, it is more expensive than ordinary term life insurance because they don;t have the extensive underwriting and weeding out of the bad apples that insurers requiring a medical exam have.

link removed as per forum norms

Posted: 26 Oct 2007 03:09 Post Subject: Life Insurance - No Exam

Hi Hadley,
Thanks for your comments.
I would advise anyone looking at life insurance on the internet to please be very careful.
Misleading, inaccurate or just completely false statements on applications for life insurance cost the insurance industry millions of dollars every year and guess what, they pass those costs on to the rest of us who do our best to provide complete accurate information.
On these web sites you will notice at the bottom of each page is very small print. Please read these statements first. You will find things like:
"Not licensed to do business in New York", "2 Year Contestible Period", "2 Year Suicide Clause", etc.
In other areas of the page, you will see all kinds of "*" which provide statements like - "Coverage dependent on underwriting guidelines", etc.
These pages are complex and there is a lot of information, other than the application questions.
There is an organization called the Medical Information Bureau (MIB) and most insurance companies use their services to determine whether the life insurance applicant has any medical information in their files. So, a person cannot actually hide a visit to the doctor.
I really didn't mean to make this so lengthy, but insurance is a little more complex than most people think and all I can say is be careful.
A life insurance "exam" is no big deal, I've had them myself.
Normally it consists of answering medical questions, stepping on scales, a mouth swab with a giant Q-tip, and maybe getting blood drawn. I have seen instances where the life insurance exam actually detected medical information that the applicant did not even know about and as a result, medical advice was obtained and the problem corrected. For very large amounts of life insurance, the exam may be conducted by a licensed physician.
It's kind of like getting a free medical exam.

Posted: 14 Dec 2007 01:19 Post Subject:

Life Insurance also helps pay for funerals, which can be extremely costly.

Posted: 01 Jan 2008 02:07 Post Subject: For your whole life

Whole Life is the easy to understand, safe and secure insurance to cover your whole life. I't is the only life coverage that I have never gotten bitter complaints about.

Sure it is not as profitable to the companies or the agent as other types of policies, and it's harder to sell at the price point. But; I believe it is the best way to go for 19 out of 20 clients.

The reason I went independant is because I got tired of the sales manager's guff about how the more profitable policies were some how better. NO, not for the majority of people I meet, they are not!

Posted: 01 Jan 2008 10:36 Post Subject:

Next to golf, prosecuting Primerica agents is one of my favorite past-times. Remember that these clowns also feel that term is the only "good" type of life insurance and that is all anyone needs - in every single case.

Let's imagine that you have a couple in their 70s that are busy with their retirement and "putting their affairs in order. During a visit with their attorney, they are told that they need a trust-funded life insurance policy to offset potential estate taxes. It is unlikely that this be done effectively with a term policy.

Let's say you have 100 clients with term policies and 100 clients with whole life insurance. After everyone dies, which group will have had the most death claims paid? Remember that the only "good" life insurance policy is the one that's in force at the moment your heart stops beating. Unfortunately, term is there only around 2% of the time.

Whole Life Insurance is Not an Investment Vehicle and I've got boxes of case law I've accumlated from people who've sold it as such. When you think of whole life as an investment vehicle, it most often is, as you called it, "garbage." However, when you think of it as a way to make sure a 91 year old grandmother's wishes are fulfilled, that most often is the way to go.

Posted: 02 Sep 2008 04:00 Post Subject:

I haven't sold much life insurance lately. I focus on medical insurance now. However, I remember dealing with Primerica when it was A. L. Williams.

They would compare their term insurance policies that used the then new mortality tables with old whole life polices that of course used the old mortality tables.

That is kind of like comparing a desktop computer with an five year old laptop and making the determination that desktops were better than lap tops.

Companies like that rarely change. I'll bet they are still playing fast and loose with the truth.

Posted: 02 Sep 2008 04:01 Post Subject:

Why is this thread in the disability section?

Are there whole life disability policies?

Posted: 29 Jan 2009 10:54 Post Subject: Whole Life Insurance

I think the only problem with debating whole life insurance is the need to classify it as either good or bad, right or wrong. Depending on the person it may work or it may not. Which is better-cookies or cake? Nobody can say for sure. It just depends on who you ask. Opinions are not facts. If it's not good for you then it's not good for you. But that doesn't mean it won't work for someone else. The best advice is to do you homework. What works for your particular situation? Take a holistic perspective. Consider every angle. Hope this helps. God bless! Take care.

Posted: 27 Feb 2009 02:45 Post Subject:

There is a place for both term and whole life. It's the agents job to fully explain the pros and cons of each.

Posted: 12 Apr 2009 04:00 Post Subject:

Louise, good call. In the future, we'll all know that [according to State Insurance Code] the terms "Job, Fiduciary Duty, and Responsibilty" can all be used correctly in this case.

Posted: 12 Apr 2009 03:35 Post Subject:

I bet that most people here have no clue what fiduciary responsibility is. Unfortunately, it seemingly isn't a subject of importance when studying to obtain a state license to sell just health/life.

Posted: 14 Apr 2009 12:11 Post Subject:

Hi,

I't is the only life coverage that I have never gotten bitter complaints about.



There shouldn't be any reason to complain if the premiums are to remain uniform with a WL and the funeral charges are to be taken care of later.

So, it seems we'd just need to check whether by opting for a term life the difference is gonna get us fair worth of return apart from covering the funeral charges. If the returns are in excess, then we should pick a term life, otherwise we should stick to the WL policies. Is it really like that!!

Steven

Posted: 14 Apr 2009 02:18 Post Subject:

The best type of life insurance is that which is in place at death. Most people need term life insurance. Many should also own whole life insurance. Some should own universal life insurance. Some should own none.

Posted: 15 Apr 2009 11:11 Post Subject:

Hi Expert,

Some should own none.


Who're they?? I guess you just got carried away in a bid to explain how policies should be owned as per one's specific requirements.

The best type of life insurance is that which is in place at death.


Again, you haven't explained the cause over here. Are you following the same view as that of quenlin!

Steven

Posted: 15 Apr 2009 11:34 Post Subject: insurance

I bet that most people here have no clue what fiduciary responsibility is. Unfortunately, it seemingly isn't a subject of importance when studying to obtain a state license to sell just health/life.

Something else I've never heard of. Fiduciary?? Can someone please explain? I've heard different opionins about Term Life and Whole Life..........negative and postive comments. Trying to make a decision, on which one is best for me, is confusing.

Posted: 15 Apr 2009 03:31 Post Subject:

Hey SD, how ya been? Here's something just for you:

A fiduciary duty is an obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty to the shareholders, a trustee has a fiduciary duty to the trust's beneficiaries, and an attorney has a fiduciary duty to a client.

A fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence, and reliance on the fiduciary to exercise his discretion or expertise in acting for the client. The fiduciary must knowingly accept that trust and confidence to exercise his expertise and discretion to act on the client's behalf.

When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter. The client is entitled to the best efforts of the fiduciary on his behalf and the fiduciary must exercise all of the skill, care and diligence at his disposal when acting on behalf of the client. A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client.

Posted: 15 Apr 2009 05:27 Post Subject:

Steven, the person who should own no life insurance is the person who doesn't care what happens when they die.

As for the type of insurance, if you die, your spouse isn't going to ask about the type of life insurance that you have. She'll only only care about the amount.

Posted: 16 Apr 2009 06:15 Post Subject:

As for the type of insurance, if you die, your spouse isn't going to ask about the type of life insurance that you have. She'll only only care about the amount.



Hey according to you , what it matters is whether or not the beneficiary is going to receive the death benefit after the death of the policy holder. Then, if I've understood you correctly, the debate about the suitable type of coverage is a futile one. Am I right?

Then, why do you think the industry has developed the wide range of insurance policies for the consumers?

Posted: 16 Apr 2009 09:28 Post Subject:

I am not saying that the type of coverage is futile. I'm saying that it is a secondary issue.

Posted: 16 Apr 2009 09:37 Post Subject: insurance

Hey SD, how ya been?

Hello! Been busy, as usual!! :roll: Alot of this CAN get confusing: ..thanks for the 'clarification.' THIS is why I tell others if they have a Beneficiary on their Life policies, to make sure it's someone they REALLY trust. Some people I've talked to automatically think the Beneficiary HAS to be their spouses'.........nope, it doesn't.

Posted: 16 Apr 2009 12:42 Post Subject:

sdchargersfan, a beneficiary designation has very little to do with trust. A beneficiary is all about who you want to have the money.

Ex. Judy is divorced. She wants to leave money to her minor son, Junior. She doesn't trust him. Therefore, she leaves the money to her friend Suzy. She tells Suzy that she would like Judy to use the money to help Junior.

There are some major problems with this.

The problems all stem from one issue. The money, at Judy's death, will belong to Suzy and not Junior.

1) Suzy can legally ignore Suzy's wishes and do what she wishes. However, let's assume that Suzy has no intention of doing this...
2) Because of gifting issues, if Suzy gives Junior more than $13,000 a year, it will eat into her lifetime gifting exclusion.
3) Possessing that money will cause Suzy to have to pay taxes on the gains.
4) Possessing the money can cause financial aid implications for her children.
5) Possessing the money makes it available if someone ever sues Suzy.
6) If Suzy dies, it will become part of Suzy's estate. If Junior's not in the will, he won't get anything.
7) If Suzy gets divorced, her husband may get half of it or maybe Suzy will get less from her husband.
8) Lots of other reasons. I see no positives in naming a beneficiary based upon trust instead of who you want to have the money.

In my above example, the better way to go is to have the money going into a trust for the benefit of Junior with Suzy as the trustee. In this manor, all of the disadvantages are gone, and Suzy must legally use the money to benefit Junior.

Posted: 16 Apr 2009 02:32 Post Subject:

Ins Expert: Good call. You are right on the mark with that one.

Posted: 16 Apr 2009 06:04 Post Subject:

Ins Expert: Good call. You are right on the mark with that one.



x2

Posted: 17 Apr 2009 06:55 Post Subject: insurance

I ALSO would like to get a 'Civilian' Will/Life Insurance policy ( I know I 'off' the subject a bit by the 'Will' thing..). I've heard you can actually do a Will yourself, VIA the Internet..I just don't know where to look. Can anyone advise me of this? Thanks.

Posted: 17 Apr 2009 10:03 Post Subject:

Hi Expert,

She'll only only care about the amount.


That's perfectly true. But what if there are 2 policies with the same cost but different returns for over a particular period of time!
It is there that the challenge of investment lies.

Steven

Posted: 17 Apr 2009 11:51 Post Subject:

There aren't 2 policies. There are hundreds of policies. There are also plenty of things that someone can do other than insurance.

We simply can't know what is best in advance. That's why I say that the best kind of insurance is that which is in force at death. Are you going to die this year? Buy annually renewable term insurance. Within the next 20 years? Buy 20 year term. Within the next 30 years? Buy 30 year term. At age 120? Don't buy life insurance.

What are you saying? You don't know when you'll die? You think that you'll probably die when you are old, but you might die before then.

This is the case for all of us. We need to figure out how much money we would like for our family to have now. Because of budgetary constaints, in many cases, this will all have to be term insurance. In many cases, this will be a combination of term insurance and permanent insurance. In a few cases, this will all be permanent insurance.

So, if the need is $1,000,000, and you buy $1,000,000 of coverage, regardless of what type of coverage you get, if you die prematurely, she'll get about the same amount of money.

People have limited dollars. If all of the coverage is term coverage and death occurs "late", insurance won't be in force at death. If all of the coverage is permanent and death occurs early, the death benefit may be too small.

1)Worry about amount of coverage
2)Worry about type of coverage
3)Ignore #2 until #1 is handled

Posted: 27 Dec 2017 01:30 Post Subject: Life insurance

Need for a 86 year old

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