Wednesday, June 15, 2022

Which Statement Is Correct About Whole Life Insurance

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Find The Best Life Insurance Policy For You

Why Is Term Insurance Better Than Whole Life Insurance?

Although it may seem like you need to choose between whole or other kinds of life insurance, the truth is that many financial plans typically include a mix of multiple kinds of policies, perhaps term and whole life insurance. This can give you more flexibility to prepare for any of lifeâs many possibilities. A financial professional can help you find the right mix of insurance and show you how it fits into your overall financial plan.

1Accessing your cash value will reduce your death benefit and may affect other aspects of your plan.

2Dividends are not guaranteed.

3Loans taken against a life insurance policy can have adverse effects if not managed properly. Policy loans and automatic premium loans, including any accrued interest, must be repaid in cash or from policy values upon policy termination or the death of the insured. Repayment of loans from policy values can potentially trigger a significant tax liability and there may be little or no cash value remaining in the policy to pay the tax. If loans equal or exceed the cash value, the policy will terminate if additional cash payments are not made. Policyowners should consult with their tax advisors about the potential impact of their policy loans.

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Whole Life Policies Can Earn Dividends

In addition to guaranteed cash value growth, many life insurance companies pay dividends.2 While you can take dividends as cash or use them to pay a portion or all of your premium, many people reinvest them in their policies. That can allow your death benefit and cash value to accumulate even more quickly.

Single Premium Whole Life Insurance:

Under the single premium whole life insurance policy, individuals have to make the premium payment in a single lump sum. The payment must be made at the issue of the policy, making the policy fully paid up, with no requirements of any further premium payments. The single lump sum premium payment will provide the policy with loan value and immediate cash value, both of which could be significant in amount, depending on the amount of the lump sum premium. Given the sizeable amount of the lump sum premium payment, the Single Premium Whole Life policy is considered more as an investment insurance product.

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Term Vs Whole Life Insurance Faqs

Whatâs the difference between term life and whole life?

Term life offers affordable coverage for a set period, usually 10-30 years. Whole life is a lot costlier because it lasts your entire life and has an investment-like component.

Is term life or whole life better?

Term life is the best option for more people due to its affordability. However, whole life is a good option for people who have a high net worth or long-term dependents.

What are the pros and cons of a term life insurance plan?

Term life insurance is cheaper and simpler to manage, but if you need insurance after your coverage expires, a policy is costly.

What are the advantages and disadvantages of whole life insurance?

Whole life provides permanent coverage, but the policy isnât cost-effective for most people and the cash value earns low interest.

Indeterminate Premium Whole Life Insurance:

Whole life insurance as an asset how to: Blending

The special feature of an Indeterminate premium whole life policy, which is otherwise similar to an ordinary whole life insurance policy, is that is allows policyholders the option of adjusting their premiums. Based on its estimate of its current earnings, cost of expense and mortality, the insurer will charge policyholders a “current” premium. In case there are any changes in the aforementioned estimates, the insurer will adjust the premium amount accordingly which the policyholder will then be charged.

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Can I Borrow Against My Whole Life Insurance Policy

A. A whole life insurance policy not only provides cash value but also has no date of expiry, which enables the policy holder to easily borrow against their such a policy. For more details regarding borrowing against your whole life insurance policy, you can contact your insurer who can guide you better.

Limited Payment Whole Life Insurance:

Under the Limited Payment Whole Life Insurance, policyholders will be required to pay premiums for a limited period of time but will receive lifetime protection. However, since the premiums are to be paid for a shorter period of time, the premium amount will be relatively higher than the premium amount payable for an ordinary whole life plan. under this kind of plan, customers have to pay premiums for a specified number of years â 10 years, 20 years, etc.

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When Does Whole Life Make Sense

Given the expense of whole life insurance and that many people do not need insurance for their entire lives, it is often not the ideal product to purchase. However, there are some specific situations where a form of permanent life insurance makes sense.

Funding a trust: Permanent life insurance can be used to fund a trust that will support children after you die.

Paying estate taxes: For those with estates larger than the current estate tax exemption, which is $11,580,000 in 2020, permanent life insurance may make sense to help heirs pay any estate taxes due when you pass away. Some states have lower estate tax limits, so it may make sense for folks living in those states as well.

Funding a buy-sell agreement: If youre an owner of a business with a partner, you might consider whole life insurance to fund the purchase of each others shares in the business at death.

Tips On Buying Life Insurance

Whole Life vs Term Life Insurance | Life Insurance Comparison
  • Make sure you feel confident in the insurance agent and company.
  • Learn what kinds of policies will provide what you need and pick the one that is best for you.
  • Do not sign an application until you review it carefully to be sure the answers are complete and accurate.
  • Do not buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.
  • When you buy a policy, make the check payable to the company, not the agent.

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An Insurance Agent Has Suggested That I Buy Term Instead Of Whole Life Does It Makesense To Buy Term And Invest The Difference

“Buy term and invest the difference” has been a popular sales slogan for term life. The pitch compares term, the least expensive form of life insurance, with other kinds of life insurance.


  • $100,000 death benefit at age 35
  • Annual whole life premium: $1,800
  • Annual renewable term premium: $250
  • Difference: $1,550

What are your choices?

  • Buy whole life. The âdifferenceâ is used to keep your premiums lower than the actual cost of insurance as you get older.
  • Buy term. You keep the difference.
  • In addition, make sure you consider the following:

    • As you get older your term premiums will increase to keep up with the cost of insurance
    • If you invested the difference, you could use your investment to pay the higher cost of insurance
    • If you spent the difference you will have to dip into other savings to pay higher premiums and
    • If your health deteriorates you may not be able to buy a new policy

    Term Life Vs Whole Life: Cost Comparison

    Both term life and whole life premiums stay the same for the duration of your policy. Because coverage lasts longer and comes with a cash value, whole life insurance is five to 15 times more expensive than a comparable term life policy.

    The charts below compare the monthly cost of a $250,000, 20-year term policy and a $250,000 whole life policy for a male non-smoker at different ages.


    Note that a whole life policy costs as much as 27 times more than term life in the example above for the same death benefit. Visualized another way, the difference in cost is even clearer:

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    Who Should Opt For Whole Life Insurance

    is a suitable form of protection for a number of individuals. You can opt for whole life insurance if:

    • You have made investments towards your post-retirement requirements and are seeking for other opportunities to invest in.
    • You own an estate and wish to plan and bequeath your estate and savings to your beneficiaries and transfer your wealth.
    • You are a young professional who has started off with their career and will be able to make premium payments for a considerable time going into the future.

    After All Is Said And Done Which Type Of Policy Should I Buy

    Solved: Which Of The Following Statements About Whole Life ...

    The truth is there are a lot of things to consider in addition to the type of policy you get. How much coverage do you need? What are all the different policy options ? Is there other coverage I need to protect my family?

    Heres an easy way to get answers to all those questions: Just contact Guardian to find a financial professional who will take the time to learn about your unique situation, listen to your concerns, and clearly explain the different insurance options that best fit your needs and your budget from a company thats been helping protect families for over 150 years.

    If you are an employee, taking advantage of your benefits at work is a smart and affordable way to get the financial protection you want for yourself and your family. Contact your HR department to review your plan details and determine how much life insurance is available to you. Your employer may provide life insurance as a benefit, or you may opt to pay for additional life insurance through payroll deductions.

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    Choose Whole Life If You:

    • Can comfortably afford the higher premiums. Whole life insurance is a lifelong commitment, so you want to make sure you can afford it. If you miss your premium payments, your policy could lapse.

    • Want to leave money for your heirs. Because the death benefit pays out regardless of when you die, you can use it as an inheritance. If you name life insurance beneficiaries on your policy, the payout will go directly to them and not through your estate.

    • Have a lifelong dependent like a child with disabilities. Life insurance can fund a trust to provide care for your child after youre gone. Consult with an attorney and financial advisor before setting up a trust.

    • Want life insurance that builds guaranteed cash value. The cash value of whole life policies grows at a guaranteed rate set by the insurer.

    What Is Whole Life Insurance

    Whole life insurance provides permanent death benefit coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate on a tax-advantaged basis. These policies may be known as traditional life insurance.

    Whole life insurance policies are one type of permanent life insurance. Universal life, indexed universal life, and variable universal life are others. Whole life insurance is the original life insurance policy, but whole life does not equal permanent life insurance.

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    How Much Will Each Kind Of Policy Cost Me

    Many factors contribute to the cost of life insurance policy some you cant control, but others you can. By learning what impacts your premiums before you get a life insurance policy quote, you can better understand your options when choosing whats best for you and your family.

    Your policy type , age, health, gender, driving record, occupation, hobbies, and the amount your loved ones would receive all contribute to the cost.

    Figure out how much you may need and what it could cost

    An Insurance Agent Has Suggested I Switch Term Companies Every Couple Of Years To Take Advantage Of The Company’s Promotional Rates In The First Couple Of Years Anything Wrong With That

    Top 16 Best Whole Life Insurance Companies and Policies

    Nothing wrong, but there is always a risk when you switch polices that you could be subject to a new contestability period. You start a new, 2-year contestability period anytime you switch . If you die during that 2-year period, the insurance company can investigate the statements you made on your application . If you’ve given inaccurate or incomplete answers, the company may refuse to pay the death benefit.

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    Find Out Which Whole Life Insurance Product Is Right For You:

    Whole Life Insurance

    For those looking to balance cash value accumulation and guaranteed life insurance coverage, this is a popular option. Over time you may find your cash value to be a convenient way to supplement retirement income.

    Custom Whole Life Insurance

    If you want to pay premiums for a specific amount of time only or if you want to maximize the cash value growth in your policy, this may be a good choice for you. Note, however, that a shorter paying period means higher premiumsall else being equal.

    Variable Universal Life Insurance

    Designed for growth, this policy allows you to invest the cash value of the policy into various investment alternatives. This affords cash value the potential to grow at a faster rate than it would in another type of life insurance plan.

    • The insurance amount is designed to be level or increase as the policy cash value increases.
    • Policy cash value fluctuates according to underlying investment performance.
    • Cash value may be invested in sub-accounts containing domestic or international stocks, bonds, real estate and other, more speculative investments.
    • Higher cash values and death benefits may be obtained or lost due to the financial climate and investment performance.
    • Investment earnings are income tax deferred.
    • Portions of the cash value, up to cost basis, may be withdrawn without paying income taxes, interest or surrendering the policy. Amounts over the cost basis may be borrowed from the policy similar to the whole life policy.

    For more information on selecting the right policy for you, please contact your financial advisor or, if you are not yet a client, use the Office Locator to find the office nearest you.

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    Premiums On Whole Life Policies Stay The Same

    Premiums are the monthly payments that you make to an insurance company to pay for your policy. Whether you have a whole life or another kind of insurance policy, you will be required to pay premiums.

    Some types of insurance policies may require you to adjust your premiums over time. But the premiums that you pay for your whole life insurance policy are guaranteed to remain fixed and consistent for as long as you have your policy. Your premium also contributes to your cash value.

    RELATED CONTENT: Our Life Insurance Guide can help you learn more about life insurance and how it can benefit your financial plan.

    What Are The Advantages Of Living Benefits Of Whole Life Insurance

    Are Whole Life Insurance Premiums Tax Deductible ...

    As you can see, in addition to its guaranteed death benefit, whole life insurance can become a financial asset that you can use throughout your lifetime. These so-called âliving benefitsâ of whole life insurance â the cash value your policy accumulates â can make a whole life insurance policy one of the most flexible parts of your financial plan.

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    What Happens When A Whole Life Insurance Policy Matures

    Most whole life policies endow at age 100. When a policyholder outlives the policy, the insurance company may pay the full cash value to the policyholder and close the policy. Others grant an extension to the policyholder who continues paying premiums until they pass. Others still stop collecting premiums, but keep the policy active until its needed.

    Riders You Can Use To Customize Your Whole Life Insurance Policy Include:

    • Disability Waiver of PremiumWith the purchase of this rider, New York Life will waive premiums should the insured become totally disabled, as explained in the policy.***
    • Option to Purchase Paid-Up AdditionsAllows you to contribute more to your policy when its convenient for you. Its a valuable way to increase your death benefit protection and build more cash value. OPP premiums are subject to an expense charge at the time of payment.
    • Chronic Care OptionProtects policyholders from the financial hardships of chronic care by providing tax-free access to a portion of their base policy benefits should they become chronically ill. Its available on most whole life and custom whole life policies at issue.1 This rider is available for an additional cost, and it must be elected when the policy is issued.****
    • Living Benefits OptionIf you are terminally ill, you can use a portion of your death benefit to pay for treatment or care with this option. This rider involves a charge if the rider is exercised.*****
    • Accidental Death Benefit Offers an additional death benefit for your loved ones if the death was caused by an accident. The rider terminates automatically at age 70. The rider involves a monthly charge until it expires.

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    What Are The Principal Types Of Life Insurance

      There are two major types of life insuranceterm and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2018, 4.0 million individual life insurance policies bought were term and about 5.9 million were whole life, according to the American Council of Life Insurers.

      Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

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