Whole Life Insurance

Whole life insurance is a type of permanent life insurance. In which the coverage and the premiums remain the same your entire life. As long as your premium payments are made as agreed, your insurance coverage lasts throughout your life, and the death benefit is a guaranteed amount.

When you pay the premiums on a whole life policy, part of each payment accumulates as a cash value. The insurance company typically invests the cash value, which continues to grow tax deferred as long as the policy is in force. You can borrow against the cash value, but unpaid policy loans and interest will be subtracted from your death benefit. You may also access your cash value by surrendering or cancelling your policy. Dividends are also typically paid on whole life contracts and can be used to either increase the death benefit or reduce the premiums.

There are a few varieties of permanent insurance:

• Whole Life - lets you pay a fixed premium for a fixed death benefit. There is a cash savings feature that, over time, provides you with a cash reserve.
• Universal Life - is a little more flexible than whole life. It may let you change the amount of insurance as your needs change. Some changes may require a medical exam.
• Variable Life - invests some of your premiums in stocks, bonds, and money market funds. The upside is that your investments may perform well, and provide a larger cash reserve. The downside is the risk that the investments will lose money, but a minimum cash value is seldom guaranteed. Most insurers guarantee a minimum death benefit, although it may not be what you had hoped to receive.
• Variable-universal Life - combines the premium and death benefit flexibility of universal life with the investment flexibility and risk of variable life insurance.

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