Whole life insurance policy combines two financial products into one: life insurance and investment. It’s a type of permanent life insurance that has fixed premiums, a death benefit, and a cash value. In New York, it’s also known as “straight life,” “ordinary life,” or “continuous premium life insurance.”
When a policy is canceled, the cash value, also known as surrender value, is the portion of the death benefit that is received. It’s also one of the most important features of permanent life insurance policies: Term life insurance, for instance, has no cash value.
Because whole life insurance is permanent, it will cover you for the rest of your life (or until you reach a certain age, usually 100 to 121 years old) as long as your premiums are paid on time. Your insurer deposits these premiums into your cash value account after deducting insurance charges and expenses.
While whole life premiums are substantially more than term life premiums ($6,760 vs. $660 for a 30-year term policy for a 40-year-old Illinois male in good health, according to Consumer Reports), whole life can be a reasonable investment for those with the financial means who want guaranteed lifetime coverage.
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Key Features of Whole Life Insurance
Your premiums will be constant throughout your life, regardless of your age, health, or inflation. You may want to ask friends for recommendations when choosing the best whole life insurance quote.
Death Benefits With a Face Value
When you die, your beneficiaries will get the face value of the policy if you pay your premiums on time and have no outstanding policy loans. Your beneficiary can decide what you would like to do with the death benefit paid to them.
Cash Value That is Tax-free
Your policy’s cash value, or savings component, will rise each year without being taxed. This money is also yours, which means you can borrow it or withdraw it.
Only if you took out more money than you put into the policy would you be taxed. Taking a loan against the cash value, on the other hand, will diminish your death benefit and, to make up the difference, you’ll be charged interest on the loan.
The ability to take a loan from your cash value in a whole life insurance policy is a huge advantage. Whole life insurance can serve as an investment for high income earners since they can borrow from it and still not be taxed. Check out the Federal tax laws and how to apply for the tax ID number in New York.
6 Basic Variations of Basic Traditional Whole Life Insurance Policy
Non-participating whole life insurance and participating whole life insurance are the two primary types of traditional whole life insurance. You can choose from six distinct variants listed below:
1. Non-participating Whole Life
Whole life insurance plans that do not provide dividends to policyholders are known as non-participating policies. Dividends are the funds left over after overhead expenses and claims are paid from premiums received. When you buy a policy, your insurance company will determine the fixed premium, death benefits, and cash value, and these sums will not vary.
2. Participating Whole Life Insurance Policy
Participating whole life is the polar opposite of non-participating whole life. You’ll receive dividends in the form of cash, reduced premium payments, accumulated interest, or the ability to purchase paid-up additional insurance if the company does well in terms of investment earnings, mortality, and expense expenses.
3. Intermediate Premium Whole Life
This insurance is similar to non-participating whole life except that the premiums are modifiable. The premium you pay will be determined by the insurance company’s investment earnings, mortality, and expense costs.
If those figures change, your premium will be increased proportionally, but it will never go above the policy’s maximum premium.
4. Economatic Whole Life
Through the utilization of dividends, economical whole life insurance is akin to combining participating whole life and supplemental coverage – commonly decreasing term life and paid-up additional insurance.
5. Limited Payment Whole Life
You can pay premiums over a shorter period of time with a limited payment policy while still getting lifelong coverage. These sums will be more than what you would pay under a continuous premium plan because you will be making fewer payments.
The opportunity to pay for the entire life insurance policy during the first years is a huge one because it will help you to save more money.
6. Single Premium Whole Life
A single premium policy, as the name implies, requires you to pay only one substantial payment at the start of the coverage. The policy is then considered paid in full, and no additional payments are necessary. In many circumstances, though, if you want to cash in your insurance during the first few years, you’ll have to pay a hefty fee.
Can You Get Whole Life Insurance Policy Without a Medical Exam?
Yes, you can get whole life insurance with no exam. The type of whole life policy you can get without a medical examination is called, Guaranteed Issue Life Insurance.
Guaranteed Issue Life Insurance is a type of guaranteed life insurance issued in the United States notwithstanding your health status. Since there won’t be any form of medical underwriting, it means there won’t be any medical exam.
Whole life insurance with no medical exam is best for seniors