What is whole or permament life insurance?

About whole (or permanent) life insurance

Whole life insurance, also known as permanent life insurance, is a type of life insurance that pays benefits whenever the insured dies, whether it is one day or seventy years from the date of purchase of the policy.

The three types of whole life insurance are traditional whole life, universal life, and variable universal life. Traditional whole, or ordinary, life is insurance is the most common type of permanent life insurance. This policy has death benefits and premiums that remain the same throughout the life of the policy. In order to keep the premiums lower toward the end of the policy, the early premium payments are a bit more than they strictly need to be to pay claims at that point. These are considered overpayments and at a certain time in the life of the policy, these are available to the insured if the original plan is cancelled.

Universal, or adjustable, life insurance provides the opportunity to increase death benefits, and even alter the premiums, using the cash value of the savings in the account. This is useful for paying the premiums if an insured’s financial conditions changes. However, it is risky, so it’s important to understand how much the cash value is worth, and how many premiums that will pay, or the policy could lapse.

Variable life insurance provides a combination of death benefits and a savings account, for which the insured can plan the investments in stocks and bonds. This is a riskier coverage, as death benefits will be tied to the performance of the investments in the market, although some policies do guarantee a minimum benefit level.