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Whole Life Insurance

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Whole life insurance, also known as ordinary, permanent, and straight life, is an insurance product that joins an investment factor with normal term insurance. Term insurance, unlike whole life insurance, only provides a death benefit for a specific period of time. The premium payment for whole life insurance pays into two separate components. Part of the charge for whole life insurance pays for the insurance coverage. Another part pays for the investment portion of the whole life insurance policy. As a person ages, more money is allocated to the insurance coverage in a whole life insurance policy. The investment component earns interest from the company administered investment portfolio and/or company profits. This part of whole life insurance increases in value over time. The amount of annual return is usually not based on a fixed rate for whole life insurance. Whole life insurance provides a cash or surrender value based on the value of the investment portion at any given time. This amount may be taken in cash if the whole life insurance policy is canceled, used as collateral for a policy loan, or used to buy additional death benefit coverage. Earnings, and certain withdrawals and loans from a whole life insurance policy may qualify for tax-favored treatment.



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