Whole Life Insurance
Whole life insurance is also called ordinary or straight life insurance. With whole life insurance, you pay a level premium over the life of the policy. The amount of your death benefit is also fixed.
Similar to other forms of permanent life insurance, whole life insurance builds up cash value in a tax-deferred accumulation fund. You can withdraw or borrow against the cash value. Unlike universal or variable life insurance, the cash value of a whole life policy is not used as a reserve to pay premiums.
Instead, whole life insurance policies pay dividends to policyholders if premiums are excessive. A dividend from a life insurance company is a return of premiums. Unlike a dividend earned on a stock or mutual fund, it is not a company's distribution of profits. Dividends can be used to pay future premiums.
The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
2008-06-09 15:25:55
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