Whole Life Insurance

All whole life (WL) policies are also known as permanent insurance. You can never outlive the coverage, and if you live to the endowment point (historically age 100 but has been increased for WL products to age 115 with the 2009 current mortality table), the death benefit is paid to the policy owner. Otherwise, if an insured dies before reaching the age of endowment, then the full face amount (or death benefit) is paid income tax-free to a named beneficiary or to the estate of the insured if no named beneficiary is alive at the time of death. The technical word for this death benefit payout is proceeds. If the term proceeds is used, it means the insured is dead.

ALL WL Products Have Three Common Characteristics:

l Level (guaranteed cost) premium – Same premium payment amount is due each year and is based on issue age.

l Fixed/level and guaranteed amount of death benefit.

l Cash surrender value (CSV), also known as living benefits, constantly grows and accumulates within the policy on a tax-deferred income tax basis. The policyholder is allowed to take loans from the CSV while he or she is alive. A loan can be taken out of the policy tax free; however, the policyholder must repay the loan with interest back to the insurance company. There is no obligation to repay the loan or interest during the lifetime of the insured. If an insured dies with an outstanding loan on the policy, the proceeds are still paid minus the loan and interest. In a WL policy, the CSV equals the death benefit at age 115.