Whole Life Insurance

Whole Life is also a type of permanent insurance and can be less flexible than Universal Life. There are many variations of Whole Life, thus our comments will be confined to what is referred to as participating Whole Life, which means that the policyholders participate in the upside of a company’s ability to manage their reserves through the payment of dividends.

Premiums for this type of insurance are normally greater in the early years than the actual cost of the insurance. The degree to which the premium exceeds the actual cost of insurance will determine the long-term cash accumulation that takes place within the policy. Usually the higher the premium, the higher the cash value accumulation.

The actual long-term performance provided by this type of insurance is impacted by the actual results the insurance company achieves relative to their death claims and actual operating expenses.

However, the greatest factor governing performance of the policy are the investment returns on the surplus premiums collected that the company achieves. Any excess premiums collected by the insurance company are refunded to the policyholder in the form of a “dividend” which can be received in cash or reinvested to increase the death benefits and/or cash value of the policy.

The funds accumulating within the Whole Life policy are not subject to taxation provided the policy falls within prescribed limits categorizing the contract as an exempt policy.

• Whole life should be utilized when there is a permanent, long-term need for coverage beyond retirement and when personal cash flow is sufficient to allow the maximum flexibility in the decision-making process.
• May be acquired in concert with Universal Life or in place of Universal Life when flexibility to alter premium “deposits” and/or death benefits is not a major concern.
• Financial stability of the company is a very important consideration, as well as the company’s long-term dividend track record.
• Features of the plan should generally include disability waiver of premium.

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