Whole Life Insurance Definition – It Varies Depending on Who You Ask

It should be easy getting a whole life insurance definition. But it’s not. This is because it can be quite a complicated product and also because some of the terms used in relation to it are misleading. For instance it is widely presented as having an ‘investment’ element when it fact it doesn’t. This ‘investment’ element is in fact a savings element which is rarely referred to accurately because of confusion in understanding about what is an investment asset and what is a savings asset.

What you get with a whole life insurance policy

A whole life policy not only provides a death benefit, which is common to all life policies but something more. These policies have a cash value component which also goes to your heirs at the time of your death. The premiums of whole life policies are set above what is needed to cover the value of the death benefit alone and the difference is spoken of as being ‘invested’ on your behalf by your insurer. This so called ‘investment’ is not however speculative as normal investments are. It is quite common for the return you will get to be precisely defined in the policy.

The definition of a whole life policy has to include this cash value component of the policy as well as the death benefit component. It also should include it’s character as a savings asset. What this means is that money put into the policy is ‘saved’ in comparable way to money put into a bank account.

Whole life insurance is a savings asset not an investment

The sales asset character of a whole life policy is not exactly like putting money aside for when your heirs need it. Certainly that is true but it leaves out the leveraging effect of this type of savings asset. All life insurance is tax exempt, including whole life policies. This means that money put into one of these policies is worth more to your overall estate than just it’s face value.

When you die, your heirs get a death benefit. They also get the value of the premiums you have paid for this policy minus administrative costs. This cash value component however has a higher value for your heirs than money put aside as savings. They receive this money without having to pay any tax on it. For this reason people practicing careful estate planning usually include a whole life policy within their portfolio because it allows them to pass on part of their estate without their heirs having to pay tax on whatever amount is involved..

How are whole life policies different to term life polices?

With term life insurance you pay set premiums as you do with a whole life policy but you are covered only for a specified term, say 10 years, not your whole life. In addition the premiums you pay for term life policies do not accrue as a cash value to you. If you die, you heirs get a death benefit but not the value of the premiums you have paid. To reflect this difference the premiums paid for term life policies are lower than they are for whole life policies.

The difference between term life and whole life policies is not just cheaper premiums but that term life pays a death benefit only. To be fully accurate the whole life insurance definition must include it’s character as a savings asset which can be used in estate planning as well as also being a life policy. Both forms of life policies provide death benefits which are tax exempt but if you want to leverage the tax exempt status of a life policy then you need to buy a whole life policy and with your financial advisers work out how to use the cash value part of the policy to benefit your heirs financially.

If you are buying a life policy to provide a death benefit to your heirs or as a form of burial insurance or as a way of covering financial obligations at the time of your death then you can quite appropriately buy term life insurance. Of course a whole life policy will also deliver the above benefits but if you are buying life insurance as part of a complex set of investment and estate protection then only a whole life policy will do. Whole life insurance definition must include it’s complex nature and its capacity to fulfill this latter purpose. As with all forms of insurance get a quote from a reputable insurance company to help you make up your mind which life policy is best for you.

Auto Insurance Definitions Simplified

Auto insurance terms can be confusing, to say the least. Below are auto insurance definitions in layman’s terms.

Anti-Theft Device – Anything on your auto that reduces the chance that it will be stolen or that makes it easier to find if it is stolen. Examples include:

* Car alarms

* Keyless entry systems

* Starter disablers

* Vehicle identification number etchings

* Auto tracking systems

Bodily Injury Liability – The amount your insurance company will pay if you injure or kill someone else with your auto.

Collision Insurance – Coverage from your insurance company for repairing or replacing your auto if it collides with another vehicle or object.

Comprehensive Coverage – Coverage from your insurance company for repairing or replacing your auto if it is damaged by anything other than a collision or is overturned.

Claim – Any request for payment under the terms of your insurance policy.

Deductible – The amount you pay out of pocket before the insurance company begins to pay on a loss.

Good Student Discount – A discount that insurance companies give students who earn high grades in school.

Insurance Comparison Website – A website that allows you to quickly and easily get auto insurance quotes from multiple insurance companies (see link below).

Medical Payments – The amount your insurance company will pay for medical and funeral expenses caused by an auto accident.

Multi-car discount – A discount that insurance companies often give if you have more than one vehicle insured on the same policy.

Multi-policy discount – A discount that insurance companies often give if you have more than one policy with the same company.

Per Occurrence Limit – The maximum amount an insurance company will pay for all claims from a single incident.

Per Person Limit – The maximum amount an insurance company will pay for one person’s injuries caused by a single incident.

Property Damage Liability Insurance – The amount your insurance company will pay for damage you cause to someone else’s car or property.

Where to Get Cheap Auto Insurance Rates

Looking at a Whole Life Insurance Definition

Probably the simplest and most direct way of explaining to someone exactly what a whole life insurance definition is would be to say that a person purchases a policy for a specific amount of money, pays monthly or annual premiums for it up to a specific designated age which can go as high as a hundred years old, and when they pass on, that designated amount is paid to their beneficiaries. There can be any number of variables attached to these policies by agreement between the holder and the issuing company, but this is the basis they all begin at. Some of the possible considerations might involve the policy building cash value which might be borrowed against over time, an earlier age for ceasing having to pay the premiums, and a way of lowering those payments over time by utilizing that cash value build-up to do so. These alternates can be worked out at the beginning, or at any time along the way that the policy is in effect.

When folks are talking about what it is to sell structured insurance settlements, again, basically it is this. One of the terms of the policy the owner made was that upon their demise, instead of a lump sum payout, the proceeds would be offered on a monthly allocation plan to the heir. In many instances the policy holder recognized that this would be of particular value to the heir who may have shown poor ability in handling bulk sums at any one time. This way of handling it would help ensure they would be protected into the future. At some point though, that person might decide for whatever reason such as a medical emergency, or perhaps a child’s education, they would like to get the money immediately. There are any number of companies willing to buy their structured settlement for a lump sum. Obviously, these companies are in business to make a profit, so the payout will be for a lower number than the recipient would receive over the course of time. It may however, prove to be in their best interest to close the deal at once.

All of these issues and considerations require a lot of thought, and one might be wise to seek outside counsel to assist in the final decision. Seeking a professional is solid advice on almost any topic, but especially finance and life insurance. They will be able to help you much more than Internet research alone.