When Does Whole Life Insurance Mature?
Whole life insurance is a permanent life insurance policy that guarantees coverage for the life of the insured as long as premiums are paid. The policy provides a death benefit to the beneficiary and also builds cash value over time. Unlike term insurance, whole life policies don’t expire, and the premiums remain the same regardless of age or health changes. The cash value generated by the policy can be withdrawn in the form of a loan, and the death benefit will be paid out to the beneficiary as long as the loan and any interest is repaid.
Whole Life Insurance vs. Term Life Insurance
Whole life insurance covers the entire life of the insured, making it more expensive than term life insurance, which covers a specific term, such as 10 or 20 years. Term policies do not accumulate cash value, and premiums tend to be lower because there is a likelihood that the policyholder will outlive the policy. When the policy expires, the policyholder must buy another term and pay higher premiums if they still wish to have life insurance.
Types of Whole Life Insurance
When buying whole life insurance, there are several types to choose from:
| Policy | Description |
|---|---|
| Level Premium Life Insurance | Provides level premiums for the life of the policy and accumulates cash value. |
| Single Premium Life Insurance | Requires a lump sum payment in exchange for a death benefit. |
| Modified Premium Life Insurance | Allows for lower premiums for the first 5 to 10 years, after which premiums rise. |
| Survivorship Life Insurance | Insures both spouses and doesn’t pay the death benefit until both pass. |
| Universal Life Insurance | Features flexible premium payments that accumulate cash value over time. |
| Variable Universal Life Insurance | Works like universal life insurance but invests the cash value portion of the premium in the market. |
Final Expense Insurance
Final expense insurance is a type of whole life insurance that is specifically designed to help cover end-of-life expenses like medical bills and burial costs. These policies typically have smaller face amounts – usually under $20,000 – and are more affordable and easier to qualify for than traditional life insurance because of the small face amount. Funeral Advantage is a final expense insurance program that provides a life insurance cash benefit when your family needs it most. Most policies range from $10,000 to $15,000 and don’t require a medical exam to qualify.
Whole Life Insurance Riders
Whole life insurance riders are features that can be added to certain whole life policies to boost their features and benefits. There are four riders to consider when buying whole life insurance:
- Accelerated Death Benefit Rider
- Guaranteed Insurability Rider
- Paid-Up Additions Rider
- Waiver of Premium Rider
Myths and Misconceptions
There are several misconceptions about whole life insurance, including the idea that it’s not worth buying. While it’s typically more expensive than term life insurance, it offers permanent coverage with premiums that never change regardless of age or health. It also builds cash value over time, giving the policyholder the opportunity to take out a loan from their policy to pay for medical bills or other expenses. Most whole life policies endow at age 100, which means that the cash value equals the coverage amount, and the policy is closed.
