Whole life insurance is the plan of choice for many people. There are many variations to this plan. It may be a good thing to look at some of them. We will begin by examining the basic whole life policy.
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- Whole Life InsuranceWhat is a whole life policy all about? If you want a policy that you can keep for as long as you live and that will pay the face amount to your beneficiaries then this may be the plan for you. There is, however, a lot more to this policy. There are two types of whole life policies…participating and non participating. Participating whole life has cash values and earn dividends if the life insurance company performs efficiently. Dividends are not guaranteed. Non participating policies have cash values but pay no dividend. The premiums are level throughout for both types and so are the death benefits. There are many modifications to these policies.
- Graded Premium LifeWith this policy the premium begins much lower that the normal cost and increases each year for a specified period then it levels off and remains level for the rest of the life of the policy. The ultimate premium is usually a little more the it would have been had a normal whole life policy been taken out at the outset. The premiums increase for 5 or 10 years depending on the particular companies idea as to how the policy should work. This type of policy is purchased by one who likes the idea of whole life insurance but doesn’t want to put out the full premium at the outset.
- Limited Payment Whole LifeThis policy is designed that you pay only for a specific period of time but you still own your policy for your entire life. What the life insurance companies are doing here is packing the cost of the policy in the first 5, 10 or 20 years for example. You don’t pay after these periods but you still own your policy. You still have your cash values and you still earn dividends. Keep in mind that the cost for such policies are more than those of regular whole life insurance policies.
- Single Premium Whole Life InsuranceThe idea here is that you pay only once and the policy remains in force for as long as you live. The policy has cash values from very early and, if a participating policy, accumulates dividends.
There are other variations to the whole life policy. They are usually referred to as modified life policies. Some have a lower level premium for 5 or 10 years and a higher level premium thereafter. There are a few others that have a more complex premium structure but with a lower premium throughout. This premium is based on whether or not the company pays a dividend. As a result the owner of the policy may end up with a lower death benefit than anticipated, if the company doesn’t perform. The older and stronger companies, however, usually are able to keep the death benefit at the original level.
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