The two main categories of traditional whole Life Insurance are a) Ordinary whole life insurance policies & b) Limited pay whole life policies. Ordinary whole life insurance policies require the policy holder to pay a fixed sum of money up to an old age. This is done to ensure that when the policy matures that the insured gets money whose value equals death benefit. But in practical cases the insured fails to keep the premium carrying on as they either die during the payment tenure or surrender the policy to get the maximum value. For Limited pay whole life policies the insured is required to pay premiums at a uniform rate. Here the period for which the policy is taken is less compared to ordinary whole life insurance policies; hence the insured is required to pay a higher amount of premium. Limited pay whole policies are further categorized into A) Interest Sensitive Whole Life Policies - This policy does not pay returns to the insured. However the amount earned by investing the insured's investment is accounted and paid to the insured, B) Universal Whole Life Insurance Policies – A very flexible type of insurance policy, which allows for a change in death benefits every year & C) Variable Life Insurance Policies – Here the insured will be able to earn a higher amount when compared with the other policies. At the same time the insured will not be able to claim other insurance benefits like loan.
Major benefit of this kind of policy is the availability of loans. The amount of such loans will be decided on the basis of his policy amount and premiums. But in such cases the amount or refund that they will receive after the expiry of policy will be less. Whole Life Policies are for people guarantees returns on investments; hence it is best suited for people who are looking for something more then protection. If the investment (premium), that you make is invested in stocks then expected returns aren’t assured, but if they are invested in other financial instruments like banks or trading sectors then the returns are ensured.