Whole Life Insurance is a relatively new form of life insurance, created to address the issues created for consumers within the traditional term life insurance structure. In a ‘Term’ (see Term Life Insurance) policy, the holder only receives the benefit if they die during the defined term, usually 20-30 years.
With whole life insurance the holder or beneficiary is guaranteed to receive the payout – that is, it lasts for your whole life. Typical Whole Life policies will have a contract end of 95 or 100 years of age, at which point the holder receives the entire contracted amount.
Generally whole life insurance premiums are going to be quite a bit more costly than term life insurance, though it all depends on age, terms, benefit amount etc.
There are multiple forms of whole life insurance, two of the most common are known as Participating and Non-Participating, or Par and Non-Par for short.
Participating Life Insurance: Participating life insurance is a policy where the holder gets to participate in the earnings (interest) generated on the money by the insurance company. These funds are then added to the benefit payout amount over time.
Non-Participating: In this form of whole life insurance the policy stipulates a fixed benefit amount that remains unaffected by the gains or losses on the money paid to the insurance company.