Whole life policies stretch the cost of insurance out over a long period of time, thereby minimizing the increasing insurance cost. The premiums can be spread out over your lifetime, or up until a certain age.
Whole of Life Insurance is a life insurance policy that remains in force for the insured' s rest of life and requires premiums to be paid every year into the policy. These policies can also be paid up in 10/15/20 years or paid up option to age 65.
Whole life insurance is the most common type of permanent life insurance, and unlike term it is permanent as long as the premiums are paid. Permanent life insurance is often used for estate planning, as well as wealth management.
There are several types of permanent insurance (e.g. whole life, universal life, etc.), all of which have the following characteristics in common:
* they have a cash value.
* they provide a death benefit.
* they last for a person's lifetime, as long as premiums are paid up.
* they can be used for wealth management, as well as estate planning.
* there are numerous options available to suit a person's needs, and each insurance company differs in their options and plan types.
This produced a benefit to both the policy owner and the insurance company. By guaranteeing the death benefit, the policy owner was assured that insurance coverage would be in force when the insured died.
These contracts would offer a "cash value", which was designed to be a cash reserve that would build up against the known claim - the death benefit. These policies would also credit interest to the cash value account and upon maturity of the contract (usually at age 95 or 100), the cash value would equal the death benefit.
Whole Life Insurance has a level cost of insurance where the costs do not increase each year - what you pay in the first year is the same as in the last year but they do not disclose the cost of insurance. After the "cost of insurance" and "administration costs" are covered, the balance of the premium is the savings or investment portion. The returns on the savings or investment part is dependent upon excess interest and investment earnings, savings in mortality costs, the operating expenses.
To summarize, apart from a minimum guaranteed return. You will have an illustration showing a guaranteed "cash value".
If you have further question feel free to contact Canada Insurance Plan.