Whole Life Insurance

BY DAN KAMPANI

Whole Life Insurance is a permanent life insurance plan that almost always carries cash values with it and covers you for an entire lifetime. There are two main types of whole life plans:

  1. Participating Whole Life
    A participating whole life insurance accumulates higher cash values based on the dividends gained from the insurance company. As the time passes, this type of life insurance also sees a substantial increase in the death benefit. As a result, unlike term life insurance, participating whole life can protect the beneficiaries from the negative effects of inflation.
    For example, if a 35 years old male, non-smoker and in great health takes a $1000,000 participating whole life insurance his annual premium in a 30-pay policy will be $13,750. A the end of 30 years, he will stop paying this premium but his policy will continue giving him coverage until the age of 121. Under the guaranteed assumptions, his death benefit remains level at all times. Also, at age 65, when he pays his last premium, his cash value in the policy is $538,140. But here is the interesting part. Under the non-guaranteed assumptions, his death benefit may increase from original $1,000,000 to $1,718,006, and his cash values may increase to $937,991.
    His total investment in the participating whole life insurance policy is $412,500. At age 65, he either takes his cash values and walks away, or lets the policy continue. At the age of 80, his death benefit could be as much as $2,831,662!
    This kind of life policy not only works against the inflation but can be used to create Bank on Yourself method of self-financing. Please call us for details on this amazing but lesser known concept.
  2. Non-participating Whole Life
    A non-participating whole life insurance also accumulates cash values but does not receive dividends from the insurance company.
    Going back to the example above, in this case, the annual premium is $10,320 until the age of 65. At this point, his guaranteed cash value is $498,630 which he can walk away with if he wants. Since there is no dividend, there is also no non-guaranteed assumption column. His death benefit also remains level at $1,000,000 forever (until the age of 121). At the age of 80, his cash value will increase to $723,320 but his death benefit will still remain at $1,000,000.

These examples are based on the illustrations run on two major life insurance carriers in the market today. Whole life insurance plans need to be custom-designed to suit the needs and affordability of the client.