There are different kinds of insurance policies geared to answer the variegated needs and demands of individuals. Whole life insurance is a guaranteed life long protection. It is also called straight life insurance or permanent life insurance.
Whole life insurance policies and their premiums are initially much more expensive than term life policies. Initial premiums are greater than the actual value of the insurance. This substantially high premium enables a whole life insurance policy to have a cash value as well as be an investment opportunity. The growing cash value is tax-free and the dividends can be borrowed against, and are used to level the premium value in later years.
The cost of the premium actually becomes low with the growing mortality risk of the insured. The cash value enables the insurance company to afford life-long coverage which would not be otherwise feasible with increasing inflation each year. Thus, whole life insurance policies have an added cash value and investment opportunity apart from the protection features.
Since there is no fixed term or duration, the policy is never out of force as long as the premiums are paid. In case of cancellation, the cash value is surrendered. Loans against the cash value are not taxable, provided the policy is a qualified one. There is a specific customer-friendly logic behind the initial high premiums and the lower later premiums. As the insured advances in age he/she may become inept at paying high premiums.
Due to its cash surrender value, whole life insurance is the most popular life insurance option. However, the initial high price and expensive premium is often a deterrent for price-conscious customers. There are many variations of whole life insurance policies. Universal life insurance policies offer great flexibility to the insured to choose the kind of premium payment and death benefits they want.
Variable life insurance provides the alternative to utilize the cash value in direct investments like stocks, and in effect raise the amount of potential return. Variable universal provides an amalgamation of the flexibility of universal policies and investment options of variable policies. Survivorship is a form of joint life insurance policy which is generally favored by affluent couples, or when one person is in critical health. Single-purchase life insurance policies provide complete ownership of the policy to individuals paying a one-time premium.