Understanding the Options for Whole Life Insurance

When it comes to purchasing insurance – life insurance is probably the policy most of us dread. Why? Well, it probably has something to do with the fact that it reminds us of our own mortality.

But like it or not, life insurance is something we all need so we can ensure our dependents are financially taken care of in the event something happens to us.

Here’s more information on just one of those life insurance policies you can purchase – whole life insurance:


What is Whole Life Insurance?

In short, whole life insurance offers just that – full-life* coverage that’ll give your dependents the financial protection they need to maintain their way of life in the event something happens to you.

Think about it – how will your family have the financial means to make payments on the mortgage, car loan, unsecured loan/credit card repayments, education expenses and any other outstanding bills if you’re without life insurance and you get into an accident that leads to death or permanent disability?

But with a whole life policy, you have life-long protection – as long as you continue making your premium repayments and don’t let your policy lapse!

Keep in mind that many insurers give you the option to make payments over the duration of your lifetime or over a period of time (ex. 20 years).

Whole life insurance policies can come in three different variations:

  • Participating Policy: “Par” policies will pay bonuses/cash dividends to policy holders who “participate” in the insurance company’s investment fund. This policy will also build up cash value over time. When your life “expires” (or you become permanently disabled – provided you have this insurance option), your recipients would receive the basic sum assured plus any bonuses/cash dividends accumulated up to the time of death/disability.
  • Non-participating Policy: “Non-par” policies will not pay bonuses/cash dividends like a par policy, but it will still build up cash value over time. Non-par policy cash values are not paid out if you surrender the policy or let it lapse. When your life “expires” (or you become permanently disabled – provide you have this insurance option), your recipients would receive the basic sum assured only.
  • Investment-linked Policy (ILP): ILPs are a bit trickier to have since they include both life insurance and investment elements. When you pay your ILP premiums, the payments are used to purchase units in the investment-linked sub-fund(s) you select. That means you have more power (and choice) when it comes to selecting the investments that’ll make your ILP grow. That also means your ILP is dependent on the performance of the sub-fund(s) you choose, making it a potentially risky choice.

*Note: Many insurers specify that a whole life policy will cover you for either your entire tire or up until the age of 99.


What are Some Common Insurance Options that Come with Whole Life Insurance?

Depending on the insurer, not all whole life insurance policies will come with “comprehensive” coverage that includes protection against critical illness and total and permanent disability coverage.

Some insurance policies will require you to purchase such insurance options as “riders”, which are add-ons that provide extra protection to your insurance policy (for an extra premium of course).

Here are some common insurance options that are often offered as “riders” on your whole life policy:

  • Critical Illness Coverage: Critical illness coverage will provide a lump sum payout in the event that you pass away or are diagnosed with a major illness covered by the rider.Although the illnesses covered by critical illness coverage varies by insurer, the most common include stroke, kidney failure, heart attack, coronary bypass, cancer (varies), major organ transplants and paralysis.
  • Total and Permanent Disability Coverage: Total and permanent disability coverage will provide either a single lump sum or annual instalments (depending on your insurer/sum assured) in the event you become completely and permanently disabled and are incapable of working to earn income. For example, if you lose sight in both of your eyes, two limbs (above the wrist or ankle) or a combination of both, you can claim the assured amount.
  • Personal Accident Coverage: Personal accident coverage will provide a lump sum in the event that you perish in an accident due to accidental, violent or visible means. Most insurers double (or more) the payout if death occurs while travelling in a public/private capacity such as a bus or airplane (varies by insurer). This rider is especially important if you’re working in a high-risk profession. However, some insurers will reduce your assured sum, depending on how risky your profession is.

Keep in mind that the riders above are generally quite affordable and necessary to fill any gaps that may be present in your whole life policy.