Different Types of Whole Life Policy

There are different types of Whole Life Insurance Policies available in the market, each of which is designed to cater to specific requirements. Read about each of these to find out more about which one may suit your needs.

1.      Non-Participating Whole Life Insurance:

A non-participating whole life policy has a level premium and face amount during your entire life. The advantages of such a policy are its fixed costs and relatively low out-of-pocket premium payments. Since the policy is non-participating it does not pay you any dividends.

2.      Participating Whole Life Insurance:

The defining feature of a participating whole life policy is that it pays dividends. Payment of dividends essentially indicates that the excess earnings which the company has accumulated via investments, savings from expenses and favorable mortality of the organization. There is no guarantee that policy holders will receive dividends. However, if dividends are paid, they will be paid in the form of cash which will be utilized to bring down the premium payment amount or will be allowed to accumulate and will attract interest at a specified rate. The dividends can also be used to for purchasing paid-up additional insurance to enhance the face amount of coverage provided.

Under these two broad categories of participating and non-participating, there are several types of whole life policies which individuals can choose from:

·         Level Premium Whole Life Insurance:

As the name suggests, level premium whole life insurance features level premium payments which must be paid till the insured is alive. The premiums collected in the early stages of this policy are sufficient to pay for the insurance protection costs. The surplus funds, inclusive of the interest earnings will contribute towards any shortfalls in premiums at a later stage when the annual premium payments may not be enough to cover the insurance costs.

·         Limited Payment Whole Life Insurance:

Under the Limited Payment Whole Life Insurance, policyholders will be required to pay premiums for a limited period of time but will receive lifetime protection. However, since the premiums are to be paid for a shorter period of time, the premium amount will be relatively higher than the premium amount payable for an ordinary whole life plan. under this kind of plan, customers have to pay premiums for a specified number of years – 10 years, 20 years, etc.

·         Single Premium Whole Life Insurance:

Under the single premium whole life insurance policy, individuals have to make the premium payment in a single lump sum. The payment must be made at the issue of the policy, making the policy fully paid up, with no requirements of any further premium payments. The single lump sum premium payment will provide the policy with loan value and immediate cash value, both of which could be significant in amount, depending on the amount of the lump sum premium. Given the sizeable amount of the lump sum premium payment, the Single Premium Whole Life policy is considered more as an investment insurance product.

·         Indeterminate Premium Whole Life Insurance:

The special feature of an Indeterminate premium whole life policy, which is otherwise similar to an ordinary whole life insurance policy, is that is allows policyholders the option of adjusting their premiums. Based on its estimate of its current earnings, cost of expense and mortality, the insurer will charge policyholders a "current" premium. In case there are any changes in the aforementioned estimates, the insurer will adjust the premium amount accordingly which the policyholder will then be charged