Chapter 2: Types of Life Policies - B. Traditional Whole Life Products

Permanent

build cash value and remain in effect for the entire life of insured or until age 100 as long as premium is paid --- most common is whole life insurance.

Whole Life Insurance

provides lifetime protection and includes a savings element or cash value --- cash value created by the accumulation of premium is scheduled to equal the face value of the policy at age 100. Assumes payment of premium until age 100. Premiums are usually higher than term insurance.

Key characteristics of Whole Life Insurance

Level premium - based on the issue age ... remains the same throughout the life of the policy Death benefit - guaranteed and also remains level for life Cash value - created by accumulation of premium - scheduled to equal the face amount of the policy when the insured reaches age 100 and is paid out to the policy owner. - remember insured and policyowner do not have to be the same person - guaranteed interest rate Living Benefits - policyowner can borrow against cash value while policy is in effect or can receive the cash value when the policy is surrendered. Cash value is the nonforfeiture value... does not usually accumulate until the 3rd policy year and it grows tax deferred.