What Are the Different Types of Whole Life Insurance?

Perhaps part of the reason so many consumers feel overwhelmed by life insurance is the sheer number of options they face once they decide to start a new policy.

For the most part, policies fall into two distinct categories: term life insurance and whole life insurance. While the former offers coverage for a predetermined period of time, whole life insurance extend the full length of the policyholder’s lifetime and provides an inherent cash value against which the insured can borrow money. Within that, there is a lot of room for customization based on your specific needs.

Let’s delve a bit deeper into some of the different types off whole life insurance that you might have available to you.

If you would like to learn more about your life insurance options, a AAA insurance agent will be happy to help.

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Universal Life Insurance

One of the most common types of whole life insurance, this option allows policyholders to adjust their premiums – or at least, the portion that goes toward their plan’s cash value – to a certain degree. Naturally, this affects the resulting death benefit accordingly, but it provides an attractive flexibility to consumers who anticipate that their financial needs will shift over the years. If you’re looking for a policy that combines the best aspects of both the highly flexible term plans and the long-term protection of whole life, this is your best bet

Variable Life Insurance

This type of whole life gives policyholders the opportunity to allocate the cash value of their plan toward specific investments they may hold elsewhere. The frequency with which you are able to change these settings may vary based on your provider, and you do run the risk that poor management of your policy could spell disaster for your plan’s cash value. Still, there’s no better way to comprehensively manage all your long-term assets in one fell swoop. Just be careful not to deplete your cash value, or you might wind up with a death benefit too low to provide adequate financial protection for your family.

A word about hybrid policies: While universal and variable life insurance are two of the most popular different types of whole life insurance, many other providers will offer plans that combine various elements of all three. Whichever plan you select, be sure that you explore all your options and understand the full extent of its features before committing to it. Better yet, reach out to an insurance professional to answer any questions you might have.

A Whole World of Options

With as much customization as whole policies offer, there is a seemingly endless array of different types of whole life insurance. Truly, there is a plan perfect for every prospective policyholder out there. Here are just a few you might want to consider:

Single premium: Although the vast majority of life insurance plans rely on regular premium payments, this type sees the policyholder contribute a single lump sum toward the plan upfront. No longer will you have to deal with the hassle of monthly or annual payments. On the other hand, you need to be able to afford the hefty one-time fee that this selection requires.

Indeterminate Premium: If you’d prefer a policy with more mutability, an indeterminate premium plan might be right for you. Rather than having a steady premium cost, your annual payment could change each year, though you will typically be bound to a maximum premium payment regardless of your customization.

Participating/Non-Participating: Serving as a kind of partial owner, the holders of a participating policy have the chance to receive a part of the provider’s profits. This variation is particularly associated with mutual life plans and stands alone as one of the few to blur the line between insured and insurer. Likewise, a non-participating plan is any that fails to include a partial ownership feature and which will not distribute profits back to policyholders under any circumstance.

Economic: This type of plan shares characteristics with a participating policy, in that both offer dividend payments to the insured. However, an economic whole life plan contributes these payments directly to a separate term life policy, rather than offering them wholesale to policyholders. On the plus side, this only serves to boost the overall death benefit amount. Think of it as an additional way to pay into your coverage without having to give it a second thought.

Joint and Survivor Annuity: Nearly all life insurance plans cover the death of a single individual, but this type actually protects two people. Most often joint and survivor plans are used by couples to provide financial support to their children, as they don’t provide a death benefit until both policyholders have passed away. Because of their extended life, these plans can be available at surprisingly low rates, making them an attractive option for young families in particular.

Are you ready to invest in your family’s future with a whole life insurance plan?