Whole Life Insurance Policy

Back in the dark ages, whole life insurance was about the only thing my friendly insurance agent ever mentioned. I guess he was fresh out of company training and had missed a couple of sessions! Suffice it to say, I was a lot younger then and had never heard of term life and the many different forms of whole life were not things I found out about until a lot later. So there is my number one tip - do some homework. Study the subject enough to be able to understand an agent's spiel and to have enough personal judgement to sift the material presented to find the most appropriate vehicle for you.

Originally whole life was designed to simply provide a guaranteed death benefit for the whole life of the insured. One of the features of these policies is that endow at age 95. In other words, the face amount of the policy and the cash value are the same when the insured reaches the age of 95.

The next step in the evolution of the whole life policy was to introduce a cash value accumulation feature that allowed the policy to sustain coverage until the insured either died or reached the age of 95. There are a lot of other policy options or riders that can be written as part of a whole life policy. One of these is a waiver of premium should the insured become ill or disabled and be unable to pay the premiums.

Most whole life policies are sold with an accidental death and dismemberment clause included. Usually the AD&D is double the face but can be any amount stipulated. There are some companies categorized as mutual companies which are owned by their stockholders. These companies pay dividends on an annual basis that adds to the cash value increase of the policy. Depending on the contract these dividend accumulations can be used in various ways to enhance policy value for the insured,

During periods of high inflation, the whole life policy got a bad name. The difficulty with whole life is to analyze accurately the "true" cost of the actual life coverage that you are buying and the investment capability is very much limited to the terms of the contract and the capability of the company to mange its portfolio of investments.

Whole life insurance is for the most part a very stable product and many buyers are used to it and prefer it. The overall degree of risk is low and comparative quotes are easily obtained. The consumer has to decide how much he or she is prepared to give up to have a portion of personal investment management handled on a company wide basis with almost no room to adjust for personal preferences of risk and reward.