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When it comes to life insurance, it pays to make an informed decision. It is imperative to understand the various types of insurance policies and the benefits they offer. Life insurance policies are mainly classified as Term insurance policy and Whole Life insurance policy. |
Whole Life insurance or Permanent policy is an insurance policy, coupled with savings and is guaranteed for your life. It is a good option if you have long-term objectives in mind and good finances. Since it builds cash value, it provides money in temporary need or in an emergency. It also has tax shelter on returns. The most common types of Whole Life insurance policies include Traditional, Limited Payment, Interest Sensitive and Single Premium whole life insurance. There are also
variations, wherein more than one person can be insured, such as joint life and family plans.
Traditional policy consists of two types - Ordinary (also known as Straight Life) policies and Limited Pay life policies. Traditional policy, gives you a guaranteed minimum rate of return on your cash value portion, in the form of dividends. Ordinary whole life insurance policies require premium payments for your entire life and also cover you for your entire life. Ideally, life policy premiums must be paid until the insured reaches age hundred, and then the cash value of the policy will equal the death benefit. With Limited Pay whole life policies, the premium paying period is compressed. Therefore, you pay larger premiums for the same amount of whole life insurance, but in a shorter duration of time. It covers you for your entire life, but instead of paying whole
life insurance premiums for your entire life, you only have to pay premiums for an amount of time that you choose. The stipulations are that premium payment period must last at least for ten years and you must wrap up your premiums by the age of sixty-five.
Interest Sensitive whole life policies are level premium whole life policies that don't pay dividends. Instead, the cash value grows. With Interest Sensitive whole life policy, you can have more flexibility. The interest rate is usually declared by the insurance company each year and is based one the current interest rate trends. These policies usually offer a guaranteed base interest rate implying that no matter how low interest rates fall, you will be paid the guaranteed interest rate, on the reserve cash value in your policy.
Single Premium Life is a whole life insurance policy with no premiums, meaning that you pay your whole policy amount up front. It follows, that Single Premium is for someone who has a very good financial status. Like other whole life options, Single Premium also offers cash value.
Apart from these major choices, you can also choose from Universal and Variable whole life insurance policies. Whatever is the choice that you make, take efforts to understand each one and the benefits of each. Your correct choice based on your requirements will stand you in good stead at a much later phase in life. | 
