Is a Participating Whole Life Insurance Right for You?

If you’re looking for whole life insurance, you might have come across the term participating whole life insurance. This is a type of permanent life insurance that allows policyholders to participate in gains made on their premium dollars. So, what does this mean?

How does it work? What types of policies are available as participating whole life insurance? All these questions and more will be answered in this guide to participating whole life insurance policies.

What is a participating whole life insurance policy?

A participating whole life insurance policy is an insurance contract designed to help pay for retirement. One of its biggest selling points is its guaranteed rate of return on premiums, as well as guaranteed face amounts if you pass away during your policy’s term.

However, before you choose a participating whole life insurance policy over other types of coverage, it’s important to understand how it works and whether or not it suits your needs.

This post will cover everything you need to know about participating whole life insurance policies so that you can make an informed decision.

What are the Benefits of Participating Life Policies?

The structure of participating life insurance differs from that of non-participating life insurance in one very important way. In non-participating policies, your premium is determined by two things: how long you plan to keep your policy in force and what level of coverage you want.

On these types of policies, you pay a standard rate every year. With participating policies, though, your premium will change over time based on what’s called your participation rate. Participation rates are determined by how well (or poorly) the insurer’s portfolio does financially over time.

If investments do well, participation rates go up and premiums decrease accordingly. If investments don’t do so well, participation rates go down and premiums increase accordingly.

Who should buy this type of policy?

The right type of life insurance varies by person. For most people, a term policy that includes universal life is ideal. However, people who want greater control over their premium costs may prefer participating whole life.

For example, if you’re planning to make large withdrawals from your policy or you think interest rates will drop before your policy matures, you might be better off with participating whole life.

If you’re considering purchasing an immediate annuity or using part of your income to purchase investments in other vehicles, it’s worth talking to an insurance professional about participating whole life.

Where can I buy a participating whole life insurance policy online?

As of 2017, you can buy and renew participating whole life insurance policies from just about any major insurer. These include companies like Mutual of Omaha, MassMutual, New York Life, Prudential and Transamerica. While there are some notable exceptions (like John Hancock), most insurers allow you to buy a participating policy online.

In fact, many will specifically ask if you’d like to complete your application electronically. To get started right away, check out our list of top participating whole life carriers to see which company is offering great rates in your state.

How much does it cost to get the best policy?

There are several types of whole life insurance. Like term life, whole life costs vary by age, health and policy type. However, unlike term policies that are temporary, whole life policies remain in force until you cancel them or they lapse.

Because of these differences, whole life policies tend to be more expensive than their term counterparts and those planning on canceling their policy will likely incur steep fees if they do so before its maturity date.

Can I use my life insurance as collateral if I need extra money fast?

It depends on what type of policy you have. Most life insurance policies do not allow cash value loans, meaning you can’t borrow money from your policy and use it as collateral.

However, some policies (commonly called participating whole life insurance) are designed to allow you to make extra premium payments at any time by purchasing additional participation periods into your policy.

If you can afford it, doing so is one way to get extra cash quickly—the interest rate on such a loan may be lower than that of other types of personal loans but it also doesn’t provide guaranteed access to your money like secured loans do.