What is a Whole Life Insurance policy? Whole life insurance was designed to give your beneficiary protection for your entire life. This means that you have insurance coverage from the date that the policy is enacted until the day that you die, up to 100 years of age. At age 100 you will receive the "face value" of the policy. The face value is the amount that the policy was originally intended to pay. Example, a $ 100,000.00 policy has a "face value" of $ 100,000.00.
Whole Life Insurance is an excellent investment for someone just starting out their financial future. Whole Life policies build what's called a "cash value" which means that as you continue to make your payments a portion of the premiums paid will go to pay life insurance, but the rest goes into a separate account that will continue to grow as long as you maintain the payments on the policy.
This account can be borrowed against later in life, if you need it. It can also be saved for college tuition for your kids, retirement or any unseen financial hardships that you may encounter.
You can pay for your Whole Life premiums three different ways. These ways are Whole Life Insurance One Time Payment, Straight Life and Limited Pay Life.
Here are the differences between the three different types of policies.
Straight Life – Straight Life insurance is "Whole Life" insurance that covers you up until your death. Straight Life insurance requires that you make premium payments for your entire life until age 100 years.
Limited Pay Life – Limited Pay Life Insurance is the same as Straight Life, in that it covers you for your entire life, but with Limited Pay Life you determine the amount of time that you make payments. The only two stipulations of a Limited Pay Life Insurance policy is that it must be paid up in full by the time you reach the age of sixty five and you must pay on the policy for a minimum of ten years.
Single Premium Life – Single Premium Life is a Whole Life Insurance one time payment, which means that you make one single premium payment and you are then covered for your whole life. This type of policy has been known to cause tax problems for some people in certain circumstances. You may want to check with not only your life insurance agent, but also your accountant before before purchasing a Whole Life Insurance one time payment policy.