What is whole life insurence?

User Avatar

Wiki User

โˆ™ 2008-12-16 15:02:36

Best Answer

Whole life insurance gives you lifetime coverage at a premium rate that does not increase with your age after you buy. In the early years of the policy, when you're a low risk, you'll pay more in annual premiums than it costs to insure you.

As you become a higher risk at an older age, the level premium eventually becomes less than the amount it takes to insure you. Level premium payments build a reserve in your policy that is used to insure you as you age. Insurance companies call this reserve the "cash value."

Click here for more about the different types of whole life insurance and the different ways to pay the premiums.

Here's some information from consumer organizations and state departments of insurance.

Whole Life Insurance

Whole life is a type of life insurance that builds a "cash value". The first 2-4 years you pay your premium, none goes into your cash value. The fees and expenses of the policy take that portion of your premium. After the 2-4 years pass, you begin to accumulate a cash value. If you want your money out of your cash value, you borrow it, typically at 6%-8% interest rate. Which, you pay the interest to the COMPANY, not back to yourself! Not only that, but when you die, the company will KEEP your cash value. Assume you have $2,000 of cash value, and your death benefit (insurance coverage) is $50,000. Your beneficiary only gets the $50,000 -- the insurance company keeps YOUR $2000 of cash value. The idea behind whole life, is that at the age of 100 you'll accumulate in your cash value your death benefit amount. So, up until that point, the insurance company takes the difference of your death benefit amount and your cash value, and they pay the difference. By the way, if you borrowed your $2,000 and then died, your beneficiary would only get $48,000!!! Look in your policy. There is a table which projects your cash value amounts throughout the years of your policy. One column says what your death benefit is. Notice how that stays level, even as your cash value goes up. It's because the cash value is NEVER REALLY YOURS!!! Your beneficiary will only get your coverage amount, NEVER the coverage amount PLUS the cash value!!!

Note that whole life policies are designed to mature at age 100. The assumption is that you will not live that lon g but if you do your premiums are considered paid in full and and the cash value in the account has reached the face value of the policy. Insurance companies at this point will issue checks for the full value and the contract is considered completed.

A type of permanent life insurance, whole life insurance is applicable for a lifetime. Generally the life insurance premiums remain fixed for the entire span of the policy, and are therefore on the higher side. With a cash value component, this type of policy has investment benefits for the insurer, which can be made accessible through policy loans or surrenders.

User Avatar

Wiki User

โˆ™ 2015-07-17 17:29:15
This answer is:
User Avatar
Study guides

Which of these is an element of limited payment life insurance

Which technology tool allows people to download a television show to watch at a later time

Which of these is the best description of cash surrender value

Which of these forms lists the amount of Social security taxes that were paid during the year

See all cards
5 Reviews
More answers
User Avatar

Wiki User

โˆ™ 2008-12-16 15:02:36

Whole life insurance is a life insurance policy thast remains in full force and effect for the life of the insured, with premium payments being made for the same period. It gives you lifetime coverage as long as you pay the premiums. This type of policy may build cash value within the policy.

This answer is:
User Avatar

User Avatar


Lvl 1
โˆ™ 2020-05-14 13:53:44

I don’t know

This answer is:
User Avatar

Add your answer:

Earn +20 pts
Q: What is whole life insurence?
Write your answer...
Still have questions?
magnify glass
Related questions

How many insurance companies are there in Nepal?

There are 25 insurance companies in Nepal. 8 life insurence company 16 non life insurence company 1 life and non life insurence company

Why do I need Life Insurance and how would it benefit me and my family?

Life insurence benefits your family when you die, it gives your family a wind fall, you pay into the pot over time, it just means if you have any sudden death the will be a pay out to make your family's life more confortable. Have a look at my insurence dot com.

How much is insurence per month?


How was life in the colonies different from life today?

They did not have computers and other electronics, they also did not have as good a doctor equipment as we do today or in other words they didn't have good medical insurence.

tern life insurence age 63 dob 03 30 1946 price for 250?

You could go and get online quotes on life insurance that will generate instantly with your information.

How much is car insurence?

1,677 is the average amount.

What is the definition of insurance and its types?

definition of insurence and it's type

Motorcycle insurence in Florida?

Yes, motorcycle INSURANCE does exist in Florida.

What is CURE Insurence company 3 digit code number?


How do I get Non resident car insurance in UK?

my car is register in belgium now i migrate in uk . normally my insurence of car is going finish from belgium . how can i register my car in uk and do insurence here in uk?

Can an insurance company sue the owner of the uninsured vehicle?

If it is your car, get insurence. If it is not, sue them.

Can you fix a touch screen phone?

only if you have insurence. if you dont then no knew phone.

People also asked