Whole Life is a form of permanent insurance where the insurance company will pay a death benefit until death or age 100. Policy face values generally are $250,000, $500,000, $1 million or other amount. Whole life policies provide for additional cash value in the contract as well. They are bought through insurance agents and whole life brokers representing companies.
Premium
There are a few ways people can pay for whole life insurance. These include continuous premium life or limited pay life. Continuous pay keeps the premium level and will stay the same until death or age 100. Limited pay is when the policy holder will pay a higher rate in the beginning of the insurance contract, but will not have to pay beyond that term - as the policy would be considered paid up.
Other whole life premium paying set ups could be modified life, single premium (lump sum) and graded - where the cost is graduated over a period of time.
Cash Value - as the policy generates cash value above the insurance costs, the policycan provide the insured with loan value and if there is money above the state death benefit (ex: $500,000), the payout will be higher - assuming there are no outstanding loans on the whole life. Distributions of death benefits are tax free.
This form of insurance is more expensive than term, but unlike term - whole life pays for your entire life and the ability to grow cash values (unlike term), make them very attractive policies to own.
Broker and Agent
Whole life policies are bought through insurance agents and brokers representing an insurance company. There is no fee for buying whole life policies. The premiums paid cover all costs associated with the contract - including the issuing broker or insurance agent.
Brokers will survey a clients needs and offer various choices, including whole life insurance.
Whole Life vs. Term
The differences are fairly simple. Term is considered temporary insurance that is in effect or offers protection to people for a set period of time or term. This could be 10 year, 20 year, 30 year or other period. To learn more, visit the Term Insurance page. When asking the difference between term vs whole, whole lasted a person's life or age 100 as discussed above. Term comes at a lower cost and does not provide options for cash value increase.
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