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In general, a participating whole life insurance policy has two parts:

  1. Life insurance coverage; and
  2. Participating policy.

Main Purpose

As a life insurance policy, its primary purpose is to provide a payout to the beneficiary in the event of the insured’s pre-mature death. Thereafter, the payout can be used for the family’s living expenses.

In addition to the basic benefit, the insured may choose to enhance the coverage, e.g. to include coverage for Total & Permanent Disability, as well as for (early) Critical Illness.

As a participating policy, it provides cash value for the policyholder.

Premium Amount

In most cases, a whole life insurance policy will be more expensive as compared to a term insurance policy. This is because the insured’s premium is contributed towards both the insurance coverage and participating fund.

Premium Allocation for Participating Whole Life Insurance Policy

Moreover, the insured pays a guaranteed premium throughout the premium term.

Premium Term

Most whole life insurance policies feature a limited pay option. In other words, the insured will pay the premium over a fixed period, e.g. till age 45, while enjoying the insurance coverage till his 100th birthday.

Coverage Amount

When we compare dollar for dollar, a whole life insurance policy provides lesser coverage in contrast to a term policy.

Coverage Term

In most cases, the policy will cover the insured till his 100th birthday. Thereupon, he will receive the coverage amount and any bonuses in the policy.

Cash Value

Unlike a term policy, a participating whole life insurance policy will accumulate cash value over time. On the whole, a portion of the policy’s premium is contributed towards the insurance company’s participating fund. Accordingly, the participating fund will generate return. Thereupon, the policy will receive part of this return as cash value. Over time, the cash value in the policy will increase.

Participating Whole Life Insurance Policy over Time

Conclusion

A participating whole life insurance policy is the result of an integration between a participating fund and a term policy. By and large, most insurance companies will offer this type of insurance policies to the consumers.

While this is true, consumers may wish to spend some time to understand more about the participating fund and its track record. All things considered, this will affect the overall returns from the policy itself.

In any case, buying a life insurance policy is a long-term commitment. Consequently, early termination may result in some financial loss. With this in mind, consumers are strongly encouraged to seek professional advice. All things considered, everyone is different and there is never a one-size-fits-all policy.

Share Your Thoughts 💭

1️⃣ Do you have a life insurance policy in your insurance portfolio?

2️⃣ What is your thought on having an insurance policy with cash value?

3️⃣ Have you made an insurance nomination?


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