The Big 3:
Permanent insurance encompasses three different types of plans, each designed to provide the insured with long-term coverage, while at the same time take their financial goals into account. The three types of permanent plans are as follows:
Participating Whole Life
Non-Participating Whole Life
Below is a basic overview of each type of plan.
This plan has two components to it; the first being life insurance and the second being an investment account. You have control over both of these components. You can choose to increase or decrease the premiums and death benefit, and you can also choose the amount you would like to invest. Earnings on the investment account may or may not be guaranteed, depending on which type of investments you choose. The Universal Life plan is also highly beneficial for those wanting to minimize taxation. Funds grow tax-deferred as long as they remain inside the policy. At time of death, all proceeds, including the growth of funds, are paid out tax-free to the beneficiary. These features help to make Universal Life policies a very effective tax and retirement planning tool.
Participating Whole Life:
This plan fully guarantees steady premium rates, death benefits, and growing cash values within the policy. Dividend disbursements vary, depending on the success of the company invested in. Cash and non-forfeiture values are usually provided after the policy has been in force for two years. Premiums are payable throughout life, but may be limited to a specific time period (i.e. 20 years, or to age 65).
Non-Participating Whole Life:
This plan, also known as Term to 100, is the most basic form of permanent insurance. As long as premiums continue to be paid, the Term to 100 policy provides life insurance coverage through to age 100. At age 100, the insured is no longer required to pay premiums. However, the insurance coverage still continues and a death benefit will be paid upon their passing. Term to 100 plans usually do not pay dividends or include cash values, though some may provide other non-forfeiture values. Accordingly, premiums for this plan are lower than those for traditional whole life policies.