Whole life insurance is one that which remains in force for the whole life of the insured person. The need for such insurance arose because all insurance policies used to be term insurance. This did not go well with the majority of people who had nothing to show for the amount shelled out as premiums when the term expired. Therefore whole life came into existence. There are six types of whole life insurance as defined by the State of New York – : non-participating, participating, indeterminate premium, economic, limited pay, and single premium.

• Non-Participating: Non participating policies are simple ones in which the death benefit, premiums, and other factors are established at the issue of the policy. In such policies the disadvantage is that the insured cannot alter the terms once the policy kicks in. Moreover unlike participating policies these do not share any dividend or profit earned by the insurance company.
• Participating: These policies are those in which the insured person gets a share of the profits earned by the insurance company. The advantage of such policies is that the proceeds or profits are not taxable. However the amount of return completely depends on the type of investments made by the insurance company.
• Limited pay: Such policies only require the insured to make payments for a certain period of time which is usually 20 to 30 years. After this period the policy is considered as paid up and remains in force till the insured person’s death. These policies cost a little more upfront but ensure that the insured remains that way for the rest of his or her life.
• Indeterminate premium: These policies are the same as non-participating ones; however the premiums may vary periodically. The amount of the premium never goes above a certain pre-determined cap (ceiling) so that the insured does not have to pay exorbitant premiums.
• Economic: These types of policies are those that are a mixture of term insurance and participating policies. In such policies a part of the dividend is used for purchasing further term insurance.
• Single premium: These are similar to limited pay policies but the only difference is that the insured pays a single big amount only once. These policies may have a fee in the initial period lest the policyholder should cash out.
• Interest sensitive policies: These are those policies that do not use dividends for increasing the cash value but use interest which varies according to market conditions. Such policies are a combination of universal life and whole life: the death benefit remains constant and premiums may vary but do not exceed the maximum limits.

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