Jeffrey Wade
Whole life insurance is a type of permanent insurance that covers the policyholder for their entire lifetime. There are two types of whole life insurance plans: participating and non-participating. Participating whole life insurance includes an investment component, where policyholders can benefit from the insurer's profits, which are paid out as bonuses or dividends. Non-participating whole life insurance, on the other hand, does not pay out dividends or bonuses, but instead offers guaranteed benefits that grow over time. These benefits can be used towards the policyholder's life goals, asset protection, or final arrangements. Non-participating whole life insurance is typically more affordable than participating insurance and provides low face amounts and strong guarantees.
Whole Life Non-Participating Insurance Characteristics and Values
| Characteristics | Values |
|---|---|
| Coverage Type | Single Life, Joint First-to-die or Joint Last-to-die |
| Premium-paying periods | 2 options: 20 years or until age 100 |
| Bereavement assistance | $1,000 available to beneficiaries to cover counseling expenses |
| Incentive plan for smokers | Offers lower rates for the first two years of the policy |
| Teladoc Medical Experts | Access to Teladoc Medical Experts at no additional cost |
| Riders | Term Riders, Spousal Term Riders, Child Term Rider, Accidental Death Benefit Rider |
| Profits | Policyholders do not receive any of the insurer's profits |
| Payments | Guaranteed payments in the form of death benefits or part of the matured amount |
| Payouts | No non-guaranteed payouts |
| Face amount | Minimum: $10,000 ($25,001 in WV); Maximum: $250,000 for new business |
| Cash value | May not have any cash value if the policy is surrendered |
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What You'll Learn
Participating vs non-participating
When searching for a whole life insurance policy, there are two types of plans: participating and non-participating. Both offer policyholders a different range of benefits, so it's important to understand the key differences before choosing.
Participating Whole Life Insurance
Participating whole life insurance includes an investment component. The insurer manages this component for you. Participating insurance is usually more expensive than non-participating insurance, so it is generally intended for an affluent clientele. Participating insurance offers policyholders the ability to benefit from their whole life insurance policy's accumulated profits. Policyholders can collect profits in the form of bonuses or dividends, which are typically dispersed annually. Dividends can be used to pay a premium or transferred to a savings account that can collect interest over time. At any time, this amount can be used as a loan or paid out in addition to the death benefit.
Non-Participating Whole Life Insurance
Non-participating whole life insurance does not pay out dividends or bonuses to the insured. Instead, they award policyholders with guaranteed benefits that grow over time, allowing policyholders to use them toward life goals, securing assets, or assisting their loved ones with their final arrangements. These accruals are collected over time and can add up to substantial amounts, assuming that all premiums are paid. Non-participating coverage has no non-guaranteed payouts, as they do not allow policyholders to benefit from profits.
Whole Life Insurance
It's important to note that whole life insurance is designed to provide coverage for your entire lifetime. To keep the premium rate level, the premium at younger ages exceeds the actual cost of protection. This extra premium builds a reserve (cash value) that helps pay for the policy in later years as the cost of protection rises above the premium. Whole life policies stretch the cost of insurance over a longer period of time to level out the otherwise increasing cost of insurance. Under some policies, premiums are required to be paid for a set number of years, while under others, premiums are paid throughout the policyholder's lifetime.
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Coverage types
Whole life insurance offers lifelong coverage, a guaranteed death benefit, and a tax-deferred cash value that can be used for loans or policy enhancement. Non-participating whole life insurance policies do not pay dividends, but they still guarantee benefits. This means that the insurer retains any profits instead of passing them on to policyholders. Non-participating policies are typically more affordable and tend to have fixed premiums, meaning they do not change over the life of the policy.
Whole life insurance policies usually provide a cash surrender value. The cash value grows at a fixed rate set by the insurer and can be used for loans, withdrawals, or premium payments. It provides a measure of financial protection to your loved ones, with a death benefit that is generally received tax-free. This death benefit is established when the policy is signed and remains the same while the policy is active.
The cash value component of whole life insurance offers tax-deferred growth, meaning you don't pay taxes on gains as they accumulate. Policyholders can access the cash value through policy loans or withdrawals, which typically have low-interest rates and do not require repayment. However, any outstanding loan balance will reduce the death benefit. The cash value can also be used to pay premiums, reducing the policyholder's out-of-pocket costs.
Specialized whole life insurance options include final expense insurance for end-of-life costs and survivorship insurance for couples, which is useful in estate planning. Whole life insurance policies offer flexible premium options, such as level, single, and limited payment plans, to fit diverse financial needs. It is important to note that failing to pay premiums can lead to a lapse in the policy, resulting in a loss of coverage and possibly the cash value.
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Premium-paying periods
When it comes to whole life non-participating insurance, there are two premium-paying periods that an individual can choose from. The first option is to pay the premium for a limited time, while still enjoying lifetime protection. This is known as a limited payment whole life policy. Since the premiums are paid over a shorter duration, the premium payments will be higher compared to a standard whole life plan.
The second option is a single premium whole life policy, which is a type of limited payment life insurance where a single, large premium payment is made upfront. Once this payment is made, the policy is considered fully paid, and no additional premiums are required. It is important to note that these policies often come with substantial surrender charges if the policyholder decides to cash in during the initial years. Due to the significant upfront payment, this type of policy is typically viewed as an investment-oriented product.
The choice between these premium-paying periods depends on an individual's financial situation, preferences, and goals. Those who opt for the limited payment whole life policy may prefer the convenience of paying premiums for a set number of years, while still retaining lifetime coverage. On the other hand, the single premium whole life policy may appeal to those who have the financial means to make a substantial upfront payment and want the assurance of lifetime protection without the burden of ongoing premium payments.
It is worth noting that, in the context of whole life insurance, the premium-paying period is distinct from the coverage period. Whole life insurance, as the name suggests, provides coverage for the entirety of the policyholder's life. This means that regardless of the premium-paying period chosen, the benefits of the policy will extend throughout the policyholder's lifetime.
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$5.95
Bereavement assistance
Whole life insurance is a type of permanent insurance that provides coverage for your entire lifetime, as long as the premiums are paid on time. It can be further categorized into participating and non-participating whole life insurance.
Non-participating whole life insurance is a type of insurance contract where all the cash values and death benefits are fully guaranteed but remain fixed. In other words, the premiums and death benefits remain level for the life of the contract. The insured does not receive any dividends or bonuses, nor do they share in the insurer's profits. Instead, they are guaranteed different types of benefits that grow over time, allowing them to use them towards life goals, secure assets, or assist their loved ones with final arrangements.
One of the key features of non-participating whole life insurance is bereavement assistance. This is a benefit offered to the beneficiaries upon the death of the insured to help them cover counseling expenses. The amount provided for bereavement assistance can vary, but it is typically a fixed amount, such as $1,000, to help with immediate expenses. This can be a valuable feature for families dealing with the loss of a loved one, providing them with financial support for grief counseling or other related expenses.
When considering non-participating whole life insurance, it is important to weigh the benefits and guarantees offered by this type of policy against those of participating policies, where policyholders can benefit from the insurer's profits in the form of dividends or bonuses. Participating policies are considered a long-term investment, allowing the policyholder to benefit more over time. On the other hand, non-participating policies offer the advantage of guaranteed benefits and the peace of mind that comes with knowing that the coverage will remain the same throughout the life of the contract.
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Riders
- Term Riders: These add additional layers of protection to cover shorter-term risks for 10, 20, or 30 years.
- Spousal Term Riders: Your spouse can take advantage of additional protection for 10, 20, or 30 years.
- Child Term Rider: This is term life insurance for your children that allows them to convert coverage to a permanent insurance plan without evidence of insurability at specified option dates.
- Accidental Death Benefit Rider: This rider provides an additional benefit to your family when the insured person passes away.
- Guaranteed Insurability Rider: This rider allows you to purchase additional insurance coverage without the need for a further medical examination. It is most beneficial when there has been a significant change in your life circumstances, such as the birth of a child, marriage, or an increase in income.
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Frequently asked questions
Whole life non-participating insurance is a type of permanent insurance that covers you until you die. Unlike participating insurance, non-participating insurance does not allow policyholders to benefit from the insurer's profits. Instead, they award policyholders with guaranteed benefits that grow over time.
Whole life non-participating insurance offers low face amounts and strong guarantees. It provides level premiums and benefits with no surprises down the road. It also offers optional endorsements and riders that can be added for extra protection and value.
Whole life non-participating insurance is suitable for those who are looking for a straightforward, low-cost option that provides lifetime protection. It is also a great solution for seniors as it offers smaller amounts of coverage.
![Non-Participating Premium Rates Together with Tables of Loan and Surrender Values 1909 [Leather Bound]](https://m.media-amazon.com/images/I/617DLHXyzlL._AC_UY218_.jpg)
