WHOLE LIFE INSURANCE POLICY

Whole life insurance policy is a class of policy that covers the policyholder during his life time. This is in contrast to term life insurance policy that only covers the policyholder for a certain number of years. It is the commonest form of insurance policy bought by policyholders and the premiums payable are most times on a flat rate although it is always more expensive when compared with term life insurance policy.

TYPES OF WHOLE LIFE INSURANCE POLICY

1. Participating whole life insurance policy
2. Non participating whole life
3. Indeterminate premium whole life
4. Economatic whole life
5. Limited payment whole life
6. Single premium whole life insurance
7. Modified whole life insurance
8. Variable whole life insurance
9. Children whole life insurance
10. Guaranteed issue/acceptance whole life insurance

NOTE: the above types of whole life insurance policy have been developed owing to the restrictive structure of whole life insurance simpliciter and to provide a more flexible structure of whole life insurance for policyholders.

Participating whole life insurance

This type provides for payment of dividends into the cash value of the policy when the insurer makes profit. In order words, these dividends comes from the profits or earnings of the insurance company’s investments although it is usually not guaranteed.

Similarly, this class of whole life insurance are most often not publicly traded as they are owned by the policyholders. Also, the dividends accruable to the policyholders are not taxable as dividends accruable from stock

Non participating whole life insurances

This type of whole life insurance do not pay dividends. However, the cash value of it still accrues interest but the insurers do not pass any of its profits to the policyholders. It is associated with economical premium payment and fixed cost of premiums. And unlike participation whole life insurance policy, it is often traded.

Indeterminate whole life

Here the premium payable is determined by the financial strength of the insurance company. Therefore, the premium payable will likely go down when the company is in its best financial health status and rise when its finance is down. However, the premium can never exceed the maximum stated in the insurance policy. And just like the non participating whole life insurance, there is no payment of dividends.

Limited payment whole life insurance

In this type of whole life insurance policy, there exists a certain premium payable for a certain number of years in the policy. And thereafter, the coverage remains active throughout the policyholder’s lifetime without payment of further premiums. For instance, if the years of coverage is seventy (70) years, the one-off premium will serve for the 70 years.

Single premium whole life insurance

This provides a situation where the policyholder pays premium of large amount of money for life coverage with no requirement for additional premium

Modified whole life insurance

This type offers payment of lower premiums during the early years of the policy but increases after a certain number of years. However, the death benefit that accrues from it is level during the lifespan of your policy.

Variable whole life insurance

This provides for the investment of its cash value in specific mutual funds which may either gain or lose value depending on the performance of the investments. The policyholders participate in the long term gains of the investments.

However, the possibility of losing more is high especially when those investments perform poorly. Thus those policies can lapse if the value of the investments drop badly and they maybe necessity of putting large amount of cash to keep the policy active or let it lapse. It in the events it lapses, it cancels the entire policy together with the accruable death benefits.

Children whole life insurance

This class operates as a form of savings as well as an insurance cover for children. Parents who purchase this kind of policy pay low premiums for their children which do not increase. And by so doing, secure life insurance for their children regardless of any future health issues.

Guaranteed issue/acceptance whole life insurance

This is the type often known as burial or final expenses insurance. It is usually purchased by policyholders who are above fifty years of age but it is always expensive

ADVANTAGES OF WHOLE LIFE INSUANCE POLICY

1. Whole life insurance policy covers the policyholder for an entire life as far as he pays premiums.
2. There is guarantee for death benefit payment
3.  The cash value of whole life insurance policy is not subject to taxation

DISADVANTAGES

1. It is usually expensive
2. It takes long time to build cash value
3. It is not flexile
4.  It does have a complex structure.