What are the different types of whole life insurance policy

Why should you buy the more expensive whole life insurance policy when you could theoretically get term coverage for just a few dollars? Most people who are in search of an appropriate life insurance policy often wonder about the answer to this question. There is no disputing the fact that term coverage is often the cheapest insurance solution in the market but the benefits of a whole life insurance policy far exceed those of term coverage making it well worth the extra dollars. Here is a list of the different types of whole life insurance and their features

Nonparticipating Whole Life Insurance Policy: In this type of coverage the premiums and the death benefits stay constant so the biggest advantage of this policy is the fixed cost of the premiums; however there are not dividends in nonparticipating policies.

Participating Whole Life Insurance Policy: As far as the dividends are concerned this is exactly the opposite of the nonparticipating policy and the buyer can enjoy the added benefits of excess investment earnings. The other advantages include expense savings and favorable mortality benefits. The dividends are often paid in cash which can then be used to make the premium payments. Alternatively, it can also e used to purchase additional coverage which will in turn increase the face value of the policy. The interest is paid at a fixed rate. However, dividends depend on the performance of the investments and hence are not guaranteed. There are several other policies hat fall within the two broad categories of nonparticipating and participating whole life insurance to choose from.

Level Premium Whole Life Insurance Policy: In this type of coverage the premiums have to be paid till the buyer is living. Even though the premiums increase eventually, the accumulated interest of the early years makes up for the deficiency in the premiums in the later years. So, as far as the buyer i concerned the premiums stay the same.

Limited Payment Whole Life Insurance Policy: As the name suggests, in this type of policy the premiums can be paid within a limited amount of time while the buyer still gets lifetime protection. Since the premium payments are divided over a shorter span of time, the amount is higher. Normally the limited time for the premium payments is ten to twenty years.

Single Premium Whole Life Insurance: In this type of policy the buyer makes the premium payment at one go which is due at issues. Since the policy is fully paid no further payments are required but the buyer can continue t enjoy the benefits of the policy through out his/ her life. The other features of this type of coverage include an almost instant cash value due to the single large payment and a significant increase in the cash value depending on the amount of the premium. This plan is perfect is a prefect investment option for people who have substantial cash reserves.