What Are the Elements That Define a Whole Life Insurance Policy?

If you’re thinking of purchasing a whole life insurance policy, you should first understand the essential elements of life insurance, especially whole life insurance coverage. Knowing the elements that make up a whole life insurance policy will not only ensure you get the best coverage but will also help you make the most of your policy.
The basic elements that define a whole life insurance policy include:

Permanent Coverage

As the name suggests, a whole life insurance policy is a permanent type of life insurance plan, meaning it covers you until you die, provided you continue to pay premiums. This means your insurer cannot cancel your policy for any reason other than failure to pay the premium as agreed. This is in contrast to term life policies, which typically last for 10, 20, or 30 years. Because a whole life insurance policy is a permanent policy, it is particularly ideal for long-term financial planning such as estate planning and charitable donations after your death.

Death Benefit Proceeds

Death benefit, otherwise known as the face value of an insurance policy, refers to the payout your beneficiaries will receive from your insurer after your demise. It is worth noting that if the value of your estate is below the federal exemption level of $5.5 million, your beneficiaries will pay no taxes on the death benefit proceeds. However, in some states, if your estate’s value is higher than the aforementioned exemption level, your beneficiaries will need to pay taxes on the death benefit proceeds. In total, 18 states across the U.S. impose an inheritance or estate tax. Death benefit proceeds are typically available in $50,000 or $100,000 increments, but they can go up to tens of millions of dollars.


The cost of a whole life insurance policy depends largely on the face value of the policy, with a high death benefit translating to higher premiums and vice versa. Depending on your insurer, you can pay the cost of your policy monthly, bi-annually, or annually. Take note that you do not necessarily have to pay your premiums for the life of your policy. Instead, you can pay higher premiums for a shortened duration, such as 15 years. In fact, this is a good way to ensure your insurer will not cancel your policy in the future.

Cash Surrender Value

Cash surrender value is the amount of money you receive from your life insurance carrier when you cancel your life insurance plan. This means over time, life insurance policies typically accrue a cash value, and the same is true for whole life insurance policies. In fact, in the case of whole life insurance policies, the cash surrender value grows tax-deferred at a constant rate. However, your insurer cannot add your cash surrender value to your death benefit proceeds. Still, you can use your whole life insurance policy as an investment vehicle. For example, you can use your policy to lower the overall volatility of your portfolio, especially if you’ve diversified your investment portfolio. Additionally, you can use your cash surrender value to:

• Purchase additional coverage
• Pay premiums
• Withdraw, in certain cases

Besides, if you’ve borrowed against the cash surrender value of your policy and die before you repay the loan, your insurer will deduct the loan amount from your policy’s death benefit.

These are the basic elements that define a whole life insurance policy. Do you have more questions about finding the right, affordable life insurance policy? Talk to the team at Jack Stone Insurance Agency today to get started on your tailored coverage that can help your family through the toughest of times.

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