Whole of Life Insurance | Life Insurance in USA

Whole life insurance, or a whole of life assurance, is a life insurance policy that remains in force for the insured’s whole life and requires premiums to be paid every year into the policy. There are several types of whole life insurance policies. New York State defines six traditional forms: non-participating, participating, indeterminate premium, economic, limited pay, and single premium. A newer type is known generally as interest sensitive whole life. Other jurisdictions may classify them differently, and not all companies offer all types. There are as many Types of Insurance Policies as can be written in their contracts while staying within the law’s guidelines.

Non-participating

All values related to the policy are usually determined at policy issue, for the life of the contract, and usually cannot be altered after issue.This means that the insurance company assumes all risk of future performance versus the actuaries’ estimates. If future claims are underestimated, the Best Life Insurance Companies makes up the difference. On the other hand, if the actuaries’ estimates on future death claims are high, the insurance company will retain the difference.

Participating

In a participating policy, the insurance company shares the excess profits with the policyholder. Typically these refunds are not taxable because they are considered an overcharge of premium. The greater the overcharge by the company, the greater the refund/dividend. For a Mutual Life Insurance Company, participation also implies a degree of ownership of the mutuality.

Indeterminate premium

Similar to non-participating, except that the premium may vary year to year. However, the premium will never exceed the maximum premium guaranteed in the Life Insurance Plans and Policy.

Economic

A blending of participating and Term Life Insurance, wherein a part of the dividends is used to purchase additional term insurance. This can generally yield a higher death benefit, at a cost to long-term cash value. In some policy years, the dividends may be below projections, causing the death benefit in those years to decrease.

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