Your Complete Resource For STRAIGHT WHOLE LIFE INSURANCE
Permanent Life Insurance Protection Level Premiums and Guaranteed Cash Value
What is Straight Whole Life and How Does It Work?
Straight whole life insurance provides level death benefit protection, level premiums for the life of the policy, and guaranteed cash value accumulation, which will be equal to the death benefit at contract maturity.
The contract’s level premiums, along with the guaranteed rate of return of cash value, will allow the cash value of straight whole life insurance to continually grow and eventually “endow” (where the cash value becomes equal to the death benefit) at a set age if the insured survives, which is typically age 100 or 121.
Is Straight Whole Life More Expensive Than Term Life Insurance?
Premiums to purchase all forms of life insurance are based on mortality tables. As individuals age, their insurance costs rise.
Straight whole life insurance requires more premiums than term life insurance policies for the same death benefit in the early years of a policy and less premiums than term life insurance in later years.
This is because as the cash value of a straight whole life policy increases, the actual insurance coverage paid for by the policy owner decreases.
The cost of life insurance is based on mortality tables. As an individual ages, the cost to provide each dollar of life insurance coverage increases.
Since term life insurance doesn’t accumulate cash value, a term policy owner will always pay 100% of the insurance costs represented by the face amount of the policy.
Effectively, as more cash value builds in any whole life insurance policy (cash value is, in reality, the policy owner’s equity in the contract), the cost associated with providing death benefit protection (the difference between the cash value and the death benefit) is reduced.
Since term life insurance does not accumulate cash value, its cost for providing death benefit protection is always 100% of the premium.
So, is straight whole life more expensive than term life insurance? The answer depends on how long the policy owner intends to keep the policy and “the opportunity cost” a policy owner will experience when committing the extra premiums needed to fund the straight whole life insurance policy.
Is straight whole life insurance right for you?
Straight whole life is often the perfect life insurance solution for long-term estate planning, business continuation, and charitable giving goals. The cash values are protected from creditors, and the contract has features that can help increase the efficiency of a comprehensive financial strategy.
We believe it is important to have an understanding of how, or even if, whole life insurance is right for you. We accomplish this through our Wealth Manifestation Process, which you can learn about here.
Is Straight Whole Life Insurance Expensive?
Although it is not the most expensive form of life insurance coverage out there, straight whole life is not the least expensive either. Since straight whole life insurance is designed so that the cash value equals the death benefit at policy maturity. which guarantees it will have value, the premium requirements for straight whole life insurance are higher than term life insurance and universal life insurance.
Is Straight Whole Life Insurance Right For Me?
Straight whole life insurance is good for people with both lifetime death benefit protection and estate planning goals.
While many people understand the need to protect income in their younger years, a whole life policy can ensure dependents receive the maximum pension and Social Security benefits after retirement.
The guaranteed death benefit, which also avoids probate, makes straight whole life a good choice for ultimately transferring assets to the next generation or funding charitable goals.
The best way to know if straight whole life insurance is for you is to work with a CERTIFIED FINANCIAL PLANNER to consider all your financial goals and the opportunity cost associated with the premiums required to fund a straight whole life insurance policy.
Are There Ways To Increase The Cash Value Of Straight Whole Life Insurance?
Like all whole life insurance policies, straight whole life insurance’s cash value increases as additional premiums are paid and the guaranteed interest rate is credited to the account.
A policy owner can increase the cash value more quickly by choosing the ‘Paid-Up-Additions’ rider if the policy is eligible for dividends.
In addition, when the policy is applied for, the policy owner can choose to include a “Paid-Up-Additions” rider, which gives them the flexibility to purchase additional single-premium whole life insurance contracts periodically throughout the policy’s lifetime.
