Whole Life Insurance: Coverage types and benefits

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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.

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PostPosted: Sun Apr 12, 2009 4:00 am   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.



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PostPosted: Sun Apr 12, 2009 3:35 pm   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.



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PostPosted: Tue Apr 14, 2009 12:11 pm   Post subject:   

Hi,



Quote:
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!!



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PostPosted: Tue Apr 14, 2009 2:18 pm   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.

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PostPosted: Wed Apr 15, 2009 11:11 am   Post subject:   

Hi Expert,



Quote:
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.

Quote:
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!



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PostPosted: Wed Apr 15, 2009 11:34 am   Post subject: insurance  

Quote:
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.
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PostPosted: Wed Apr 15, 2009 3:31 pm   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.



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PostPosted: Wed Apr 15, 2009 5:27 pm   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.

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PostPosted: Thu Apr 16, 2009 6:15 am   Post subject:   

Quote:
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?
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PostPosted: Thu Apr 16, 2009 9:28 am   Post subject:   

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

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PostPosted: Thu Apr 16, 2009 9:37 am   Post subject: insurance  

Quote:
Hey SD, how ya been?
Hello! Been busy, as usual!! Rolling Eyes 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.
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PostPosted: Thu Apr 16, 2009 12:42 pm   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.

Cool 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.

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PostPosted: Thu Apr 16, 2009 2:32 pm   Post subject:   

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



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PostPosted: Thu Apr 16, 2009 6:04 pm   Post subject:   

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





x2
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PostPosted: Fri Apr 17, 2009 6:55 am   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.

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