Whole Life Insurance

Whole life insurance is permanent coverage designed to last your entire life as long as premiums are paid. It combines a death benefit with a cash value that builds on a schedule written into the contract, and a premium that is usually level for life. All of it is subject to the policy terms and the insurer’s ability to pay claims. It costs more than term for the same death benefit because it is built to last a lifetime and to hold a cash value, and it is not an investment.

Schneiderman Insurance Agency places whole life for families and business owners across the Los Angeles area. This page covers what we review with each of them, including what California law fixes about the policy and what the illustration cannot promise.

What in a whole life policy is actually guaranteed?

Three things, and each is a contractual guarantee rather than a projection. The death benefit, as long as premiums are paid. The premium, which does not rise with age or health once issued. And the cash value schedule printed in the policy, which shows the minimum cash value at each anniversary. Those are the guaranteed column of the illustration. Everything in the other column, dividends, enhanced values, projected loan balances, is an assumption the insurer can change. California’s life insurance advertising rules require that where dividends are illustrated, they rest on the current scale and carry a statement that they are not guarantees of future dividends. We hold to that on this page by not illustrating them at all.

What does the cash value do, and what does it cost to use it?

The cash value is the policy’s reserve. It can be borrowed against or partially withdrawn, and a policy loan does not require credit approval or repayment on a schedule. It is not free money. An outstanding loan accrues interest at the policy’s loan rate, and any unpaid loan and interest are deducted from the death benefit when you die. A large loan left unmanaged can also cause the policy to lapse if the loan balance approaches the cash value. The cash value is a feature of the contract, not an investment, and we do not project its growth. What we do is show you the guaranteed column and explain what the assumptions in the other column depend on.

What does California law guarantee on a whole life policy?

The same protections that apply to every individual life policy issued or delivered in this state. Incontestability after no more than two years in force during your lifetime, except for nonpayment, under Insurance Code section 10113.5. A grace period of at least 60 days under section 10113.71, during which the policy stays in force. No lapse for nonpayment without at least 30 days’ mailed notice to you and to your named designee under section 10113.72. A free-look period of 10 to 30 days, and 30 days if you are 60 or older, under sections 10127.9 and 10127.10. California’s nonforfeiture provisions also require a whole life policy to offer a cash surrender value or a paid-up option if you stop paying after the policy has built value. The money in the policy does not simply vanish on lapse.

The Insurance Code sections here reflect the statute as published by the Legislative Counsel at the time of writing. They are amended from time to time, and that office publishes the current text.

What is an in-force illustration, and why ask for one?

An in-force illustration is a fresh projection run by the insurer on your existing policy, using its current values and current dividend scale. The illustration you saw at the sale was a projection from day one. Years later, dividends may have run above or below that scale, loans may have been taken, and the policy may be tracking ahead of or behind the plan. Ask for an in-force illustration every few years, and especially before taking a loan or changing premium payments. It is how you find out what the policy is actually doing rather than what it was expected to do.

Who buys whole life insurance?

People who want coverage that lasts a lifetime rather than a set term. Those who value a level premium and contractual guarantees over flexibility. Parents and grandparents funding a juvenile policy. Households with a lifelong need such as a dependent with a disability, an estate that will owe tax, or final expenses. Business owners who want a permanent policy behind a buy-sell agreement.

What affects the premium?

Age at issue, the death benefit, health and medical history, tobacco use, the underwriting class, and whether the policy is participating. Because the premium is fixed for life, the age at issue matters more than it does for term. A whole life premium started at 35 is a very different number from one started at 55 for the same face amount, and it never changes afterward.

How do we help with whole life insurance?

We start with what the policy has to do, and for how long, and whether a lifelong premium is one you can sustain, because a lapsed permanent policy protects no one. We show you the guaranteed column and explain the assumptions behind the other one. We fill in the lapse-notice designee, and we set a reminder for the in-force illustration. Term, universal life, and indexed universal life sit side by side on the types compared page, and the wider picture is on our life insurance page.

Every household is different, and this page does not replace a review of your own situation. To start, request a quote below or call 818-322-4744.