Whole life insurance is a traditional form of permanent life insurance. Whole life insurance plans are designed to provide insurance coverage for the whole life of the insured, whether he lives to age 50 or age 100. It provides lifelong coverage by having the insured overpay for the policy over many years.
The excess funds earn a stable rate of return, and build significant cash value in the the insured’s account. In the later years of the policy, the carrier pays a rising portion of the underlying cost of the insurance from this excess cash value.
Traditionally whole life policies have a premium that remains steady for the life of the policy. The amount of the over funding is targeted so that the policy’s cash value grows to match the death benefit at age 100 when the policy is said to endow. If the insured should die before age 100 the policy’s death benefit is paid to the beneficiaries. If the insured lives to age 100, the carrier will pay the accumulated cash value in a lump sum to the insured.
For the complete story, click here.