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Whole Life Insurance

Overview

Whole life insurance provides lifetime insurance coverage with certain guarantees. One of the major appeals of Whole Life Insurance is that it guarantees a minimum death benefit no matter how long you live assuming the premiums are paid each period.
  • The insured pays a fixed premium, guaranteed, for the life of the insurance contract.
  • You are guaranteed to receive the policy’s minimum cash value and a guaranteed minimum death benefit.
  • Dividends, which are not guaranteed, can increase your cash value and death benefit above the guaranteed minimums.

Potential Advantages

  • Premiums are fixed and allow the client to plan cash expenditures accordingly.
  • The discipline of fixed premiums can eliminate the potential to skip a premium payment, which can result in policy funding problems.
  • Dividends are not guaranteed but can be used to reduce the policy owner’s net cost.

Potential Disadvantages

  • You can’t increase or decrease the face amount of your policy. Additional coverage requires the purchase of another policy, additional costs, and evidence of insurability.
  • Cash accumulation within the policy is very limited.

2nd to Die – Survivorship

A type of life insurance on two people (usually married) that provides benefits to the heirs only after the last surviving spouse dies. This differs from regular life insurance because the surviving partner doesn’t receive any benefits after their spouse dies. This type of insurance can be an effective estate planning tool.
  • For individuals who expect that large estate taxes can be assessed on the death of the second spouse, survivorship life insurance can be a smart estate planning tool. By providing a death benefit upon the death of the surviving insured, survivorship policies can be used to pay estate taxes and other expenses at the death of the second spouse.
  • Survivorship insurance may be a good strategy in cases where one member of a couple is in less than good health, making other types of insurance extremely expensive for that individual. Since two lives are insured in this type of policy, premiums for survivorship life policies are relatively low compared to individual policies on each spouse’s life because the insurance cost is not based solely on the individual in less than perfect health. Therefore, if the other spouse is in reasonably good health, the couple can usually obtain survivorship life insurance.
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