Moneyzine
Contents
/Personal Finance/Whole Life Insurance

Whole Life Insurance

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
September 25th, 2023
Advertiser Disclosure

Definition

Whole life insurance is also referred to as permanent life insurance. Coverage remains in effect as long as the policyholder continues to make annual premium payments.

Explanation

Whole life insurance is marketed as a policy that is designed to last for the policyholder's "whole" life. These life insurance policies include level premiums plus the accumulation of a cash value account. This makes whole life a good choice for consumers with long-range insurance goals. The cash balances associated with these policies can provide money to help fund temporary financial needs or emergencies.

The total cash value depends on the type of whole life policy purchased, its size, and how long it is in existence. The growth in cash value is tax-deferred under current federal income tax law. The premiums for whole life insurance fall somewhere in-between the less expensive term life insurance and more expensive universal life policies.

There are many types of whole life plans sold in the United States. Participating whole life plans allow the policyholder to "participate" in excess profits (fund investments do better than planned) and losses. Participating plans shift the risk the fund will underperform relative to expectations to the policyholder. Policy premiums will be lower, but when the fund under-performs, additional premiums may be needed to make up the shortfall.

With non-participating policies, the insurance carrier assumes the risk the fund's investments will under or over perform relative to expectations. Premiums will be higher, but the policyholder is insulated from the additional payments that could be necessary under participating plans.

It's also possible to purchase single premium policies, which allow for a one-time premium payment. Limited pay policies are also available, which allow the policyholder to pay for a certain term (typically 20 years), after which the policy is paid in full.

More about Life Insurance

If you would like to learn about the interesting and revealing life insurance statistics, check out our article here.

Related Terms

Related Content

How to Make a Million Dollars in 10 Years
Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
March 26th, 2024
How to Apply Maslow’s Hierarchy to Your Money This Year
You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
March 27th, 2024
How to Tackle Multiple Savings Goals
When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
March 22nd, 2024
The Countdown to Early Retirement: 10 Expenses to Eliminate
Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
March 22nd, 2024
What’s Your One Page Financial Plan? Mapping out Your Future
“What’s your one page financial plan?” — This is the absolute best question that I’ve heard asked in a long time. Instead of talking about your hot stock pick or your fancy investment that shields you from paying taxes, I think it’s time for all of us to step back and ask ourselves the most intelligent question of all, “Why the heck do I care about money anyway??”
March 14th, 2024

Contributors

Moneyzine 2024. All Rights Reserved.