What is whole life insurance ?
Whole Life Insurance is a type of insurance policy which covers the entire life of the individual insured, and requires the premiums to be paid in a yearly basis into the policy plan. This policy came into being because in term life insurance the insured gets the benefits only when claimed on death and that too within the time for which plan is covered. As it turns out people demanded a better value plan as in term insurance they pay for a long time only to see the plan getting wind up after the stipulated plan period. In response, this insurance policy with premium payments leveled was conceived with a slightly higher premium than conventional term insurance.
These policy or insurance contracts offers “cash value” on the cash reserve which build up over time till death. This is known as death benefit. Again these policies also give vested bonus which is nothing but an interest amount on the cash reserve upon maturity, which usually spans till the age of 95 or so. Upon maturity the cash value is supposed to be equal to the benefits at death. This policy is a hit for both the customer and the company. Since the death benefit is guaranteed, the insured is assured that till the time of his death, the cover remains enforced. The company also makes profits with every premium payment because of the 30 to 40 percent overcharge and other profits.
Actually the insurance companies average the premium to be paid in a one year term, but taking into account the whole or entire lifetime which is stipulated at somewhere above 95 years. What results is a premium which is substantially high compared to a usual term policy premium but with added benefits. Usually premium to be paid with term insurance increases with age leading to un-affordability, however with whole life insurance the insured has to pay the same premium calculated at time of commencement of the cover. What happens is we overpay our premium above the actual cost of the policy. Now the real question, to what happens if the insured decides to cancel the policy? Well to the fact the company pays a portion of the overpayment in some percentage decided from time to time and company to company.
This policy is especially beneficial to people who have fluctuating health problems which tend to deteriorate over time. Then comes the extra topping which you tend to get if you take up such a policy through your employer. Usually in such cases you end up getting extra perks in addition to the documented benefits. Whole Life Insurance policy with all these features is also known a permanent life insurance which is really suitable when a person wants a life insurance cover for his entire life. However this plan is not suitable for people who tend to insure their life only for a certain period of time. Many people go for term life cover in their own reasons.
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Whole Life Insurance is a type of insurance policy which covers the entire life of the individual insured, and requires the premiums to be paid in a yearly basis into the policy plan. This policy came into being because in term life insurance the insured gets the benefits only when claimed on death and that too within the time for which plan is covered. As it turns out people demanded a better value plan as in term insurance they pay for a long time only to see the plan getting wind up after the stipulated plan period. In response, this insurance policy with premium payments leveled was conceived with a slightly higher premium than conventional term insurance.
These policy or insurance contracts offers “cash value” on the cash reserve which build up over time till death. This is known as death benefit. Again these policies also give vested bonus which is nothing but an interest amount on the cash reserve upon maturity, which usually spans till the age of 95 or so. Upon maturity the cash value is supposed to be equal to the benefits at death. This policy is a hit for both the customer and the company. Since the death benefit is guaranteed, the insured is assured that till the time of his death, the cover remains enforced. The company also makes profits with every premium payment because of the 30 to 40 percent overcharge and other profits.
Actually the insurance companies average the premium to be paid in a one year term, but taking into account the whole or entire lifetime which is stipulated at somewhere above 95 years. What results is a premium which is substantially high compared to a usual term policy premium but with added benefits. Usually premium to be paid with term insurance increases with age leading to un-affordability, however with whole life insurance the insured has to pay the same premium calculated at time of commencement of the cover. What happens is we overpay our premium above the actual cost of the policy. Now the real question, to what happens if the insured decides to cancel the policy? Well to the fact the company pays a portion of the overpayment in some percentage decided from time to time and company to company.
This policy is especially beneficial to people who have fluctuating health problems which tend to deteriorate over time. Then comes the extra topping which you tend to get if you take up such a policy through your employer. Usually in such cases you end up getting extra perks in addition to the documented benefits. Whole Life Insurance policy with all these features is also known a permanent life insurance which is really suitable when a person wants a life insurance cover for his entire life. However this plan is not suitable for people who tend to insure their life only for a certain period of time. Many people go for term life cover in their own reasons.
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