Whole Life Insurance

Whole Life Insurance May Be The Answer

You may already know that the traditional uses for life insurance are to provide a cash fund large enough to pay off debts and pay for ongoing living expenses. However, other use may be to supplement retirement income, help pay for college expenses, and to pay off or pay down a mortgage. Cash value whole life insurance can be an excellent source of funds for an emergency or opportunity.

The use of whole life insurance may be indicated when there is a need or desire:

To have fixed and known annual premiums

A guaranteed schedule of cash value growth

Accumulation of tax-free or tax-deferred earnings on cash value, depending on whether gains are distributed at death or during lifetime

To have an alternative to municipal bonds since participating whole life oftentimes pays higher effective interest through a combination of guaranteed cash values and dividends

To have cash values that are not subject to market risk that are linked to longer term municipal bonds and other longer term fixed income investments

The ability to borrow funds from the cash value on favorable terms since the cash value continues to grow with interest earning of at least the minimum guaranteed rate

Assuming the uses of whole life insurance are a good fit for solving one or more problems, it is then necessary to learn more about the policy.


Whole Life insurance provides protection over the insured’s entire lifetime. The policy’s fixed and level premiums are created to make the whole life insurance contract affordable for as long as you decide to keep it. As a result of the fixed and level premium, the policy develops cash values. There is also a death benefit that remains level throughout the lifetime of the policy.


The Cost Of Whole Life Insurance


Whole life insurance death benefits are payable upon the insured’s death regardless of when death occurs. Because the cost of insurance is spread over the entire policy period, whole life insurance is intended to be affordable permanent protection over the insured’s entire lifetime. The premiums for whole life insurance need to be weighed with the cost. For example, a policy can have a relatively large premium yet be low in cost by having large dividends, higher cash values or interest credits. 


Whole life insurance dividends and riders


Some whole life insurance policies afford greater flexibility in the funding level of future premium payments by use of policy riders. One way to lower the usual whole life policy premium is to use low load term riders with face amounts up to 10 times the base contract. This combination of whole life and term rider can significantly reduce the amount of premium outlay. Another option is to use a decreasing term rider and elect dividends to purchase paid up whole life additions of insurance to produce a level death benefit.

Some participating whole life insurance policies designate dividends for the particular purpose of providing level coverage at lower than usual premium. Details vary among products, but the basic purpose is to provide whole life insurance protection with a low premium. One approach is to use a special whole life policy that reduces the face amount after a few years but use dividends to buy deferred paid up whole life additions of insurance. The indented effect is to use the paid up whole life insurance additions to reach a total death benefit that is equal to the original face amount of the policy.


The Vanish pay option


The term, “vanish pay” refers to the method of using future dividends and surrenders of paid up additions of whole life insurance to create a self-sustaining policy. The idea of the vanish pay concept is to have an entirely paid-up policy with no further premium payments needed to keep the full amount of whole life insurance coverage for the reminder of the insured’s life. Greater flexibility can be added by arranging for larger than usual premium payments through a rider that allows these premiums to buy additional paid up whole insurance. The combination of paid up additions that are bought with policy dividends and additional premium payments, together with future policy dividends essentially transforms an ordinary level premium whole life policy into a form of limited payment whole life insurance, whereas premiums are payable for a limited number of years. After which the policy becomes paid-up, meaning no further premium outlays are due on the policy. The full face amount of the whole life insurance policy is available to provide coverage for the insured’s entire life.

Vanishing premium is sometimes incorrectly used in place of vanish pay. If the assumptions are met, a policy with rapid escalation of cash value will be entirely paid up after a number of years. No further premiums are expected to keep the full death benefits for the insured’s whole life. The total cash value is at least equal to or greater than the single premium needed at the insured’s current age to maintain an amount of insurance equal to the policy’s face amount, (the death benefit). These assumptions can prove to be insufficient for example, if dividends are lower than anticipated. The policyowner will then need to continue premium payments to keep the policy in effect, increasing the time needed for vanish pay option to occur.  Thus the name vanishing premium can be erroneously used since no future premium payments are expected to be necessary in a vanish pay option but could be required if projections are not fulfilled.  


Dividends can often be used in other ways to increase the policy’s cash value. The option to add to cash value permits dividends to accumulate as additional cash value without adding additional pure insurance protection. This option permits a whole life policy to escalate the buildup of cash value and death benefits. The amount of each increase in cash value also increases the death benefit by the same amount


Types Of Whole Life Insurance

A policy that meets the definition of life insurance and is funded more quickly than a paid up policy based on a seven premium payment test is a modified endowment contract or MEC.

The potential to rapidly build cash values with dividends applied to a policy’s cash value could result in the while life insurance contract being classified as a modified endowment contract. The significance is that modified endowment contracts (MEC), have less favorable tax treatment than whole life insurance contracts, particularly in regards to lifetime distributions of cash values. The tax deferred buildup of cash values and tax free death benefits are generally the same for modified endowment contracts as they are for life insurance. Therefore, some care should be taken with premiums and dividends designated to increase cash values if the contract owner wishes to avoid having the status of a modified endowment contract. 

Those Individuals or companies wanting to benefit from rapidly escalating cash values may wish to consider a modified endowment contract for their insurance and investment objectives. 


Whole Life Insurance Dividend Options. 


The most common offerings for dividend options are:

  •        Paid in cash
  •        Used to reduce premium
  •        Purchase additional paid-up insurance
  •        Buy one year term insurance
  •        Accumulated while earning interest


Is whole life insurance right for you?

Complete the contact form below to get in touch with one of our insurance and financial professionals.

Remember! The facts, information, and skills acquired by an agent through experience and education; the theoretical and practical understanding of the field of insurance and the strength of the insurer and their commitment to service can make a major difference in how cost effective your insurance will be.

In other words, don’t buy life insurance online as you would for software, books, music and flowers (the top selling internet items). Life insurance is not a commodity where the lowest cost means the least expensive. A cheaper policy may not provide the protection it is meant to provide and pay benefits at a time when it is needed most, when a loved one dies.


It is important that we get together to discuss strategies that will benefit you.

Please use this list below us a guide for times that will be beneficial for you to be in touch with the professional who cared enough to provide you with the request brochure.






It will also be to your benefit if to contact as soon as possible after any of these events happen.



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*Debt signals the need for life insurance. If you’re in debt, it’s obvious that your family wouldn’t be able to afford that debt if your income was gone.


Who should you call upon? It should be the CIBERQUTOES TEAM of professionals.


We should be there to help you make the right decision concerning all of those.


Don’t make one or more mistakes that can cost you tens of thousands and even millions of dollars in losses, expenses and aggravation. These life insurance mistakes are constantly being repeated even though they can be avoided or fixed with a relatively simple solution.


The Ten Most Common Life Insurance Mistakes

Avoid potentially serious and costly errors. These mistakes can be avoid before buying life insurance or if found on time can be corrected quickly and inexpensively. This is a must have for anyone who owns or wants to buy life insurance.
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Before you go, don’t forget about the importance of policy review- which may be able to help improve your coverage or simply offer a reassuring confirmation that everything is on track.



Questions about your life insurance coverage



  1. How much coverage do you currently have?
  2. What type of insurance do you have?
  3. Why did you pick that type of coverage?  

When you first purchased your policy, did you have goals? What is the primary purpose for your current life insurance policy?

  • Is death benefit protection the single purpose?
  • Do you want the opportunity to build cash value for potential use in later years?

If your current life insurance policy will not help meet your goals, it may be time for a policy review.

Newer products on the market may be appropriate if they show better death benefit guarantees and lower insurance cost. Cash value policies with competitive crediting rates may also create new opportunities for your coverage options.  



Benefits for critical, chronic and terminal illness



And finally, are you getting more from your life insurance policy with access to benefits you can use while you are still alive. These are features that accelerate the death benefits for critical, chronic and terminal illness.

The unexpected and the probability of changes in health can and do happen. According to the CDC almost 1 out of every 2 adults had at least one chronic illness in 20121. Heart attacks happen about every 34 seconds in the United States2 and strokes in the United States happen to someone about every 40 seconds3.

Life insurance policies that offer these living benefits can give you the opportunity to plan for and use a portion of your death benefit while you are still alive. For example, a parent that qualifies for the critical illness benefit because of cancer can use the accelerated death benefit to pay out of pocket medical expense or treatments not covered by health insurance. The parent can also make preparations for the children’s college tuition and payoff of a mortgage early to ensure the house remains a home for the family. There are many planning possibilities when you have early access to the life insurance policy’s death benefit.    

Click the image below to find out how these benefits can be a part of your policy.


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You can read more about,

Chronic Diseases: The Leading Causes of Death and Disability in the United States1 at

Heart Disease: Scope and Impact2

Stroke in the United States3 Every year, more than 795,000 people in the United States have a stroke (1 about every 40 seconds).



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  • Make sure cash is available
  • Provide income
  • Pay debts
  • Create a large cash fund
  • Pay taxes
  • Run a business
  • Replace valuable employees
  • Hire and retain employees
  • Gifts to children or grandchildren
  • Gifts to charity
  • Gifts to persons of great importance in your life
  • Preserve the confidentiality of financial assurances to significant others