Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.



What is Whole Life Insurance


Whole Life Insurance

Whole life insurance policies were the main type of insurance sold before universal life insurance policies hit the market in 1979. Whole Life Insurance main features are guaranteed premiums, guaranteed death benefits, and a guaranteed policy value. With most policies, the premium remains level throughout the life of the policy. Some policies offer an option to pay higher premiums upfront for a shorter period (i.e., to age 65). Whole-life policies have a 31-day grace period from the premium due date.

Whole life policies have nonforfeiture options, which include:

  • Surrendering the policy for its cash value.
  • Applying the cash value to purchase paid-up term insurance, which maintains the death benefit for a limited amount of time.
  • Applying the cash value to purchase a reduced death benefit policy that is fully paid up.

Nonparticipating Whole Life

Nonparticipating Whole Life policies are purchased with a guaranteed premium for a specific death benefit that is guaranteed to last to age 121.

Depending on the policy, the policy values may:

  • Be a guaranteed amount that increases each year.
  • Grow based on a fluctuating interest rate.

Some Whole Life policies guarantee that the policy value will equal the death benefit by age 120. This typically means that if the insured is still living at this point, the policy terminates, and the policy owner receives the policy value.

Participating Whole Life

Participating Whole Life policies are generally more expensive than nonparticipating Whole Life policies. When the insurance company doesn’t use the extra premium it collects to meet its obligations, it will credit the excess premium back to the policy owner in the form of dividends. When dividends are declared, the policy owner may use them in several ways:

  • Take them in cash.
  • Use them to lower premium payments
  • Use them to earn interest.
  • Use them to purchase paid-up life insurance.
  • Use them to purchase term insurance.
  • Use them to repay any outstanding policy loans

Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.