There are two types of whole life coverage, sometimes referred to as an ordinary life insurance policy. There are participating policies and non-participating policies that can be purchased through many different insurers. Participating policies pay dividends, while non-participating do not offer this as an option.
As a result of having these choices available, the costs of non-participating policies are lower than those of the former. The premiums for these life insurance policies, however, are higher than those of term life insurance policies, but as you may learn there are certain provisions that some owners may consider an advantage when making a final decision.
Another important feature of a whole life policy is the death benefit. The death benefit of the whole life policy remains level from the date of purchase, up until age 100 in general. At the time of death, with the only exception being a suicide occurring during a period outlined in the policy, any beneficiaries will be paid 100% of the value of the policy.
Cash values make the policy more appealing
One good thing about an ordinary life insurance policy is that it provides what’s known as cash values. From the outset, life insurance companies will load up on the premiums of these types of policies in order to protect themselves against any potential losses. These funds are later returned to the insured in the form of a cash value as part of their policy investment.
Participating whole life policies earn dividends if the insurance is efficiently operated. The more efficient the insurance company, the higher the amount of the dividend. Having a well-organized and efficient company can result in high returns on investments, which will again benefit the clients who procure coverage. By keeping their operating costs low, some insurers are able to pass on a portion of their resulting profits to their policyholders.
Dividends can be used to purchase paid-up additions, or they can be used to reduce monthly premiums. There is also the option of letting them continue to accumulate interest, or if desired, a policyholder could receive them in cash, annually by check. If interested in a whole life policy, speak to an agent that can assist you with specific details.