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Whole Life Insurance Explained

How Whole Life Insurance Can Help

Whole life insurance is still a good buy for those who can afford it. Sometimes it seems that term insurance has such a powerful lobby on the Internet that people forget that there is something called a whole life policy. This policy is still around after more than 100 years and is stronger than ever.

Why is this? It is simply a good policy. It is expensive but it is a good policy for people who can afford it. There are many advantages to this policy whether you buy it in it’s traditional form or a modified form.

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The whole life policy has a guaranteed death benefit for the life of the policy. That statement is enhanced when you consider that the life of the policy is the rest of your life. The death benefit is never less than the amount you contracted for. It can be more which you will see later on in this page. Upon death the face amount of the whole life policy is paid to your loved ones in one lump sum or if you choose in the form of a monthly income …

This monthly income can take one of many forms as follows:

  • Life Income. You can choose to pay your beneficiaries an income for as long as that person lives. Whenever that person dies there is no more payment to anyone else. That is the end of it.
  • Life Income With Certain Period. You can instruct the insurance company to pay a life income to your heirs with a certain period. Let us assume you chose a life income with 20 years certain. Your beneficiary is your wife. She receives the income for 12 years and then she too dies. After that the income must continue to be paid to a contingent beneficiary for another 8 years.
  • Income Of A Fixed Amount. You can say to the life insurance company; “pay to my beneficiary $500.00 per month until the proceeds derived from my whole life insurance policy are exhausted”.
  • Income For A Fixed Period Of Time. You can tell the insurance to pay out the proceeds of the policy in equal payments over a period of 10 years for example.
  • Interest Income Option. The life insurance company would pay out whatever interest is earned from the proceeds of your whole life insurance policy each year and keep the principal in tact. You can decide at what point the principal will be released or you can leave that up to your heirs.

Cash Values

People find the cash value build up in a whole life policy a very attractive feature. You have some flexibility here. After your policy has been in force for a few years you would have earned some cash values. This is guaranteed. If at any time in the future you need to put your hands on some cash you may borrow up to about 80% of this cash value. You pay it back at your convenience. If there is an outstanding amount owed at the time of your death it will be deducted from the death proceeds before any payment is made.


All participating whole life insurance policies earn dividends if the life insurance company performs well. Dividends are not guaranteed. There are several dividend options to choose from.

  • You may take your dividends in cash. Each year, assuming a dividend is earned by your whole life insurance policy, the life insurance company will send you a check for the amount earned.
  • If you don’t choose a dividend option at the time of application most life insurance companies apply dividends to purchase paid up addition. Additions are paid up whole life insurance policies which just sit there and accumulate interest. Paid up additions increase the death benefit of your whole life policy.
  • Dividends can be applied to reduce premiums. This is a good option and some life insurance companies automatically apply this option if none is chosen by you.
  • Dividends can also be left to accumulate interest. This can be quite sizable if left for a few years.

There are certain riders that you can add to your whole life insurance policy. First there is the…

Waiver Of Premium Benefit Rider

If you should become disabled, anytime after six months of disability, the life insurance company will step in and pay the premiums for you for as long as you are disabled even if it is for the rest of your life. When you are well again and able to go back to work you will start paying the premiums again. You would not owe the life insurance company the money they paid for you.

Accidental Beath Benefit Rider

If you should die in an accident the life insurance company will pay twice the death benefit to your beneficiary.

These are the benefits gained if you buy a whole life insurance policy. It is a little costly as far as life insurance costs go but if you can afford it it may be a good buy for you.

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