High cash value life insurance
A cash value whole life insurance policy can be a great option for younger population. These life insurance plans not only work as a life insurance policies but also accumulate deferred cash over time. The insured can use this cash to fulfil whatever he or she needs and wants in the future.
The premium of a whole life insurance plan for a depends upon how the policy is designed. Something else also needs to be kept in mind when looking to set it up for a teenager.
There are two kinds of whole life insurance plans in the market:
- Non-participating whole life Mostly stock companies offer non-participating policies the annual profits are not shared and no dividends are paid to the policyholders.
- Participating whole life Almost all mutual companies offer participating whole life. Every year, they allow a portion of the company’s profits to be paid out in the form of policy dividends as refunds. This allows an accelerated deferred cash accumulation overtime.
The premium for a $500,000 participating policy for a male in good health is $305.37 monthly. Whereas the premium for the same policy for a female is $265.79 monthly.
The non-participating policy premium is usually lower. For example, it is $197.12 for a male and $177.32 for a female.
Single Premium Whole Life
For how long you want to pay the premium depends entirely on you. A whole life can be from a single premium whole life to any number of years that you desire to pay. Once the premiums are paid, you no longer put anything into the policy. But your cash value keeps increasing over the years. In a participating plan, even the death benefit increases over time. This gives a kind of inflation protection to the beneficiary.
For example, a single premium for $500,000 non-participating whole life for a 19 years old non-smoker female in excellent health is $48,425. For a 19 years old male, the same policy will cost a single premium of $56,485.
It is important to understand the difference between these two whole life insurance plans. It is even more important if the target of a whole life policy is to accumulate as much cash value as possible over time.
Participating whole life plans are primarily sold by mutual life insurance companies. A few of these carriers include Penn Mutual, Mass Mutual, and New York Life. Since these companies don’t have stockholders, part of the gains they have for a given year is shared with the policy holders. These are called dividends. As a result, the cash value accumulation is much larger in participating cash value whole life insurance policies.
Non-participating whole life policies do not offer dividends. These plans offer an interest rate of usually between 2 – 3%. Because of this, the cash value accumulation is not that sharp. That is the reason why these plans are less expensive compared to participating whole life plans.
Also keep in mind that whole life insurance plans can be and should always be custom-designed to suit your need and affordability.
They say whole life insurance is a scam.
Read this book and you will never say that again.