Single Premium Whole Life

What is it?
Permanent (cash value) life insurance
Whole life insurance is called permanent protection, meaning the coverage (and possibly the premiums) lasts for your entire (whole) life, as long as the premiums are paid. The death benefit is a guaranteed amount, and your premium is fixed. When you pay the premiums on a whole life policy, part of the money accumulates in a cash value account.

When can it be used?
You have a long-range insurance need
The purpose of whole life insurance is to protect against long-range or permanent needs. The coverage extends over your entire lifetime (generally up to age 95 or 100), protecting you even after you stop working. You can lock in a premium schedule, so you won't have to worry about the rising cost of insurance as you get older or your health deteriorates.

Strengths
Provides benefits common to all cash value insurance
Like all other permanent (cash value) policies, a whole life policy contains the following features:

• Cash value grows tax deferred
• Cash value can be borrowed against (however, unpaid policy loans will reduce the death benefit available to your survivors)

Policy provides guaranteed minimum death benefit
Your whole life policy provides a minimum death benefit, which is usually equal to the face amount of the policy. This death benefit is guaranteed as long as you pay your premiums when due and your policy remains in force. See Tax Considerations for more information.

Policy cash value receives guaranteed rate and predictable growth
With a whole life insurance policy, the insurance company manages your cash value and guarantees the return you will receive. The cash value that is part of your whole life policy is held in the general account of the insurance company. Even if the insurance company's investments perform poorly, you still receive the same rate of interest on your cash value. However, you should keep in mind that if the insurer faces insolvency, funds in the general account could be subject to claims by creditors of the insurer, including all other policyholders.

Your premiums are a fixed amount
When you buy a whole life policy, your premium payments are a set, level amount, making budgeting for your payments easy because the premium can't be increased. Even if the insurance company's general account (through which death benefits are paid) performs poorly or your health declines, you can never be required to pay a higher premium to maintain the guaranteed minimum death benefit.

Choice of premium payment periods available
While whole life insurance coverage lasts your entire lifetime, your premium payments don't necessarily have to. Whole life insurance may offer a variety of premium payment options. For instance, if you want to pay a smaller premium over your lifetime, you may want to consider ordinary level premium whole life. Or, if you want to pay larger premiums for a shorter amount of time, you may want to consider limited pay whole life.

Can be cost-effective form of permanent insurance protection
If you expect your insurance need to last your entire life without diminishing, a whole life policy can be a cost-effective way to buy insurance protection. In the short term, whole life (or any type of permanent (cash value) life insurance, for that matter) is more expensive than term insurance. In the long term, however, whole life may be less expensive. With term insurance, you can count on your premiums increasing with each renewal. When you buy a whole life policy, however, your premiums are level and will not increase over time, an advantage if you keep the policy for many years.

How to get started?
Determine your life insurance need and overall financial goals
If you expect your insurance need to last your entire life without diminishing, a whole life policy can be a cost-effective way to buy insurance protection. In the short term, whole life (or any type of permanent (cash value) life insurance, for that matter) is more expensive than term insurance. In the long term, however, whole life may be less expensive. With term insurance, you can count on your premiums increasing with each renewal. When you buy a whole life policy, however, your premiums are level and will not increase over time, an advantage if you keep the policy for many years. Before you buy life insurance, you need to know how much insurance you need. Insurance need is based on numerous factors, including your current age and income, marital status, number of incomes in the household, number of dependents, long-term financial goals, level of outstanding debt, and existing insurance and other assets. Your overall financial, estate, and tax planning goals and your planning time horizon should be considered as part of your insurance need evaluation.

Tip: Consult with your financial advisor concerning your need for insurance.

Complete the insurance application and name your beneficiary
Before the insurance company can issue your policy, it must receive a completed application form. The application includes general health questions, and the process may include a physical examination, which is usually paid for by the insurance company. A critical part of the application is the beneficiary designation--the naming of the person or persons to receive the policy proceeds when you die. You must name a primary beneficiary (this can be your estate) to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as beneficiary, be sure to designate an adult as the child's guardian in your will.

Generally, you can change your beneficiary at any time. Changing your beneficiary usually requires nothing more than signing a new designation form and sending it to your insurance company. If you have named someone as an irrevocable (permanent) beneficiary, however, you will need that person's permission to adjust any of the policy's provisions.

Review your insurance needs periodically
The amount of life insurance you need may change over time, so you should periodically review your life insurance coverage. It's especially important to review your coverage when a major life event occurs (such as the purchase of a home, birth or adoption of a child, or change in marital status).