WHOLE LIFE INSURANCE

It’s a versatile financial instrument that helps protect families and businesses from uncertainty while assisting them in building and enhancing wealth.

WHOLE LIFE insurance is the original form of permanent life insurance, providing a death benefit for your entire life based on a specified premium obligation. Whole life provides for:

  • A guaranteed level premium: This is guaranteed never to change.  The policy will stay in effect as long as you keep paying premiums.

  • A guaranteed death benefit: The level of the death benefit (the amount paid to your beneficiaries) is guaranteed never to decrease.

  • A guaranteed cash value: A cash value that is guaranteed to grow at a set rate each year until it is equal to the face amount of the policy at a specified age, typically age 100.

  • A guaranteed endowment: The death benefit is guaranteed to be paid if the insured is still living at the age specified in the contract, typically age 100 or 121.

It can even pay dividends depending on what company you buy it from.

How does it all work?

Whole Life is the original life insurance product. The purchaser (you) transfers ALL of the risk onto the insurer (the company). That is why Whole life tends to be more expensive. It is a TOTAL transfer of risk.

Then they stripped it down, took away the cash value (investment stuff), and mitigated the amount of time they carry as tisk and created term life.

Then back in the 1980s when interest rates were as high as they had ever been, they took term life, gave the purchaser the investment risk, and called it universal life. There. Now you kinda get the lay of the land.

What do you mean, “investment portion”?

It is like this, when you pay your monthly mortgage, a portion goes to the principal, and the rest goes to interest. Payment number one is probably 99% interest and 1% principal. Whereas your last payment is 1% interest and 99% principal. In between the first and last, the balance shifts from one extreme to the other.

With WHOLE life policies, a bulk goes toward the insurance cost in the beginning, and the rest goes toward your cash value. This a-symmetry allows the company to guarantee as much as they do.

Can the “infinite banking” thing work with Whole life, or is that only with Indexed Universal Life?

Whole life can be used in a very similar way. In fact, if the “infinite banking” thing is something that is of interest, but you’d really like to have the additional GUARANTEE than WHOLE life is the best option.

What can I do with the dividends?

Policy dividends are a non-guaranteed “return of premium” calculated annually based on favorable loss experience, investment performance, and expenses.

  • Yep, just get a check.

  • Pretty straightforward here. Subtract the dividend from next years premium.

  • You are already insured, so there is no additional underwriting. Increase your coverage for a certain period of time without any additional cost.

  • You have cash in your policy, so you can move it there and let it grow.

  • If you have taken a loan on your policy, you can use the dividend to pay it back.

Unlike universal life, whole life offers more guarantees but less payment flexibility. Compared to term life, whole life provides life-long coverage and cash value; but the cost for a given level of death benefit is typically higher.