What exactly is Whole Life Insurance? how do we get the best coverage at the best price? As the term suggests, Whole life insurance is a type of life insurance that serves the insured for the rest of their life. In most cases insurance companies require the policy owner to pay the premiums every year. It is different from term life insurance in the sense that the policy owner only gets their claim upon their death, within the stated term indicated in the policy. Since this was the case many individuals have been disappointed with this setup. As such, actuaries responded to the market pressures by designing and eventually offering a different type of insurance called Whole life insurance.
When you get a whole life insurance quote from different insurance companies, you will encounter several types. Traditionally, there are six types however the insurance companies have introduced another form which makes it 7 all in all. Not all companies offer all types or forms.
1. Non-Participating Whole Life Insurance - For this form of insurance, all values associated with the policy such as the cash surrender values, premiums, death benefits are most often determined at the issuance of the policy and cannot be altered after issuance. This simply states that the insurance company takes on all future performance risk as against the actuaries' estimates. When a policy owner has claims that are underestimated then the difference is shouldered by the insurance company. On the opposite side, the insurance company will maintain the difference if death claims are high.
2. Participating Whole Life Insurance - this is also known as "with-profits policy. In this form of insurance, the excess profits such as dividends or refunds (not taxable and considered as an overcharge of premium) are shared with policy owners by the insurance company. It is proportionally shared by giving high refunds or dividends when overcharge is also high.
3. Indeterminate Premium - This form of Whole Life Insurance is like non-participating type with the difference in premium in the sense that it doesn't have a fixed cost from year to year. Individuals need not worry about this because the premium cost will not exceed the ceiling price guaranteed as stated in the policy.
4. Economic - This form is a mixture of term and participating. The part of dividends earned is used to acquire additional term insurance. This will result to having a higher death benefit.
5. Limited Pay - This is patterned after the Participating type but premiums are paid only on a certain period of time. There is also an arrangement wherein the owner can only fully pay the policy at a certain age.
6. Single Premium - This is similar to Limited Pay with having a single large payment upfront for a specific period. However, there are fees on the early policy years in cases where individuals choose to cash it in.
7. Interest Sensitive - this is the newest addition to the whole life insurance. It is most commonly known as current assumption or excess interest due to its combination of the traditional and universal whole life policies. The policy cash value interest depends on the market conditions. The premium cost also varies from year to year but not to exceed the guaranteed maximum price according to what is indicated in the policy.
When you get a whole life insurance quote from different insurance companies, you will encounter several types. Traditionally, there are six types however the insurance companies have introduced another form which makes it 7 all in all. Not all companies offer all types or forms.
1. Non-Participating Whole Life Insurance - For this form of insurance, all values associated with the policy such as the cash surrender values, premiums, death benefits are most often determined at the issuance of the policy and cannot be altered after issuance. This simply states that the insurance company takes on all future performance risk as against the actuaries' estimates. When a policy owner has claims that are underestimated then the difference is shouldered by the insurance company. On the opposite side, the insurance company will maintain the difference if death claims are high.
2. Participating Whole Life Insurance - this is also known as "with-profits policy. In this form of insurance, the excess profits such as dividends or refunds (not taxable and considered as an overcharge of premium) are shared with policy owners by the insurance company. It is proportionally shared by giving high refunds or dividends when overcharge is also high.
3. Indeterminate Premium - This form of Whole Life Insurance is like non-participating type with the difference in premium in the sense that it doesn't have a fixed cost from year to year. Individuals need not worry about this because the premium cost will not exceed the ceiling price guaranteed as stated in the policy.
4. Economic - This form is a mixture of term and participating. The part of dividends earned is used to acquire additional term insurance. This will result to having a higher death benefit.
5. Limited Pay - This is patterned after the Participating type but premiums are paid only on a certain period of time. There is also an arrangement wherein the owner can only fully pay the policy at a certain age.
6. Single Premium - This is similar to Limited Pay with having a single large payment upfront for a specific period. However, there are fees on the early policy years in cases where individuals choose to cash it in.
7. Interest Sensitive - this is the newest addition to the whole life insurance. It is most commonly known as current assumption or excess interest due to its combination of the traditional and universal whole life policies. The policy cash value interest depends on the market conditions. The premium cost also varies from year to year but not to exceed the guaranteed maximum price according to what is indicated in the policy.
1 comments:
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