Wednesday, January 17, 2007

Ways to purchase a Whole Life policy

With whole life, there are several options in which you can purchase this policy. Though, if you read my argument why term is better, you wouldn't bother with whole life in the first place. But, if you are still going to get Whole Life, here are several ways you can purchase it. Please note: Whatever purchase plan you take, you are covered for life!

1) You can make one lump sum payment, which is called Single Premium. Whatever coverage you choose, you can pay all the premiums in one payment. This is the least popular method since most people don't have over $20,000 in their hands. How much you need to pay is calculated on how long you are expected to live (your life expectancy).

2) You can make installment payments, which are called limited-pay. In this plan, you make payments over a given period of time or until a certain age. Limited-Pay Whole Life policies are commonly referred to in terms of their payment period, such as 20-Pay Life or Life Paid at 60. While your policy is paid up at a specific age, coverage continues for the whole life.

3) The final and most popular payment is paying continuously, which is also known as Straight Life or Continuous Premium. In this plan, you make payments until you death or until age 100, whichever comes first. In Straight Life Whole Life, you are not obligated to continously pay until you die or when you reach age 100. You may skip your premiums at anytime and not forfeit your equity in your policy. This is called nonforfeiture option. You may take the cash value of the policy or perhaps continue the full face value protection of your current policy for a fix period of time. To learn more about nonforfeiture option, click here.

In conclusion: 1) The shorter premium payment period, the higher annual premium. 2) The higher the premium per thousand face amount, the faster growth of cash value.