What Are The Different Types Of Whole Life Insurance

Do you want a life insurance policy that will last for the rest of your life? If so, then you’re probably leaning towards a whole life insurance policy, rather than a term life insurance policy that will only last for a defined period of time.

What Are The Different Types Of Whole Life InsuranceBut did you know that there are also different types of whole life insurance policies to choose from? Take a minute to read the quick guide to the types of whole life insurance policies below so that you’ll know which type works best for your insurance needs.

Whole Life Insurance Explained

As mentioned above, whole life insurance is a type of life insurance that offers protection for the entire life of the policy holder. It doesn’t expire after a set time like term life insurance does. In addition, whole life insurance includes an investment component. A portion of your premium goes into a cash account.

You have the option of borrowing cash value of the account or even making withdrawals from it. Premiums for whole life insurance are higher than for most term life insurance policies. Now on to the different types of whole life insurance policies available...

Types of Whole Life Insurance

Two primary types of whole life insurance are: Participating whole life and non-participating whole life. With a participating whole life policy, the policy holder benefits from company earnings. When the company earns, the policy holder is paid dividends which can be deposited into the cash account or sent directly to the insured as cash. Non-participating whole life insurance policies don’t pay dividends but have lower premiums.

Universal Life Insurance

With a universal life insurance policy you earn interest on the cash value of your policy. When you pay a premium, part of that payment becomes the cash value of the policy and that cash value earns interest over time. Since you have the options of deferring capital gain taxes on your policy and borrowing money against it tax-free, a universal life insurance policy offers more in the way of investments than a traditional whole life policy.

Variable Universal Life Insurance

Variable universal life insurance is a type of whole life insurance. So it also offers life insurance combined with an investment component. Variable universal life insurance takes it one step beyond regular universal life insurance in that it offers policy holders the opportunity to decide how your money is invested. You can pick from different investment options including bonds and stocks or a fixed account. You can even change your investment allocation without being taxed. This type of whole life insurance offers a good deal of flexibility to policy holders.

Survivorship Life Insurance

Also called joint and survivor insurance or second-to-die insurance, this type of whole life insurance insures the lives of two people on one policy. The death benefit is paid to the beneficiaries at the death of the second policyholder. In other words, both of the insured will die before the death benefit is paid out.

Survivorship insurance is a common option for married couples wanting to protect their beneficiaries from hefty estate taxes. Estate taxes can be delayed until the death of the second spouse. A survivorship life insurance policy can help the beneficiaries pay estate taxes thus protecting the insured’s ability to leave a proper inheritance.