Ordinary life insurance is simply an alternate term used for whole life
insurance or straight life insurance.
The American people seem to lean more to the term whole life today. Let us take a look at what ordinary whole life insurance is all about.
The death benefit of an ordinary whole life policy remains level from the date
of purchase, usually, right up until age 100.
To put it another way, if you have a policy for $1,000,000 and you should die your beneficiaries will be paid $1,000,000.
It doesn't matter how or when you die. The only exclusion is suicide. If you die by your own hand within a specified period of time set by the company the amount paid is limited to the premiums paid to date.
The elimination period varies but with most companies is 2 years.
Cost Of The Policy
There are two types of whole life policies. These are
participating policies and non participating policies. Participating
policies pay dividends, non participating do not.
As a result of this the costs of non participating policies are lower than those of the participating policies. The premiums for these life insurance policies are higher than those of term life insurance policies but as you will see there are certain reasons for that which some owners consider an advantage.
Ordinary life insurance policies have what is known as
From the outset life insurance companies load the premiums of these
types of policies in order to protect themselves against loss.
Later when they find that they did not need these funds in the first place they return them in the form of a cash value.
If the owner of a policy should opt to terminate it at any time in the future the cash value is returned to him or her. Cash values earn interest and can be considerable if left alone over a long period of time.
Participating ordinary life policies earn
if the life insurance is efficiently operated. The more efficient the
the company the higher the dividend.
Some life insurance companies are extremely effective at getting a very high return on their investments while, at the same time, keeping their operating costs very low. They pass on a portion of the resulting profit to their policy owners.
Dividends can be used in many ways.
It is important to keep in mind that cash values are guaranteed but dividends are not.
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