Typically there are seven different kinds of whole life insurance to choose from. Not every single insurance company offers all seven whole life insurance options. However, there is one thing all policies for whole life insurance have in common and that is premiums.
A premium is the payment that you pay to an insurance company to obtain and maintain an insurance policy. If you fail to make your premium payments, your policy can end up being terminated. Usually when a policy gets terminated for failing to pay the premiums, you will end up with nothing. That is why it is very important to always pay your premiums on time.
With both participating and non-participating whole life insurance, the amount of the premium gets set when the policy starts. The premiums remains the same for the entire policy’s life and cannot be changed. With a non-participating policy, if the premium ends up being too low or too high, it is the insurance company that either keeps the excess or pays for the shortfall. On participating life insurance, the excess is shared by the insured and insurance company.
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Economic whole life is a blend of participating and term life insurance. Any excess of premiums that are paid (called dividends) is used for purchasing extra term life insurance. If dividends come in below the estimate, the death benefit on the policy decreases for the year.
An indeterminate premium just means that the cost of premium on the whole life policy will vary each year. It is similar in some ways to non-participating whole life, except that changes to the premium are made to meet the current conditions in the market.
Limited pay is a type of whole life insurance that is very similar to participating whole life. However you only pay premiums for a certain specified number of years instead of for your entire life. For example, you may pay premiums for 20 years. After the time period is over, you will still be covered by the whole life insurance without having to pay any premiums.
Single premium is a type of whole life where the entire policy is paid for with one large upfront payment. It is a kind of limited pay. Once the lump sum has been paid, there aren’t any other premiums that need to be paid and you are still covered by the insurance policy.
Interest sensitive is a type of whole life insurance where the cost of the premium can vary based on current market conditions. This is similar to what happens with universal life insurance. The interest on the total cash value of the policy changes as market conditions change with the premium being adjusted as well.
Every whole life insurance policy requires that the insured pay premiums. They are just paid differently depending on what type of policy it is. An insured individual who makes an initial large premium payment on the insurance policy will probably be able to that again at some point in the future. Insured individuals who don’t make a big premium payment will probably not be permitted to do so in the future.
