Life Insurance Learning Center - Whole Life Insurance Types

Straight Life Insurance, Part 1

This policy is sometimes called ordinary life insurance. Like the one-year renewable term life insurance, this life insurance is very widely purchased and offered as well. Let us examine all of the six aspects of a life insurance policy in relation to this policy because it important to see how this policy works in relation to those aspects.

The duration of this policy is until the insured reaches the age of 100. If the insured continues to live past the age of 100, and the policy owner continues to pay premiums until the coverage expires when the insured turns 100, the life insurance company will pay the death benefit to the policy owner (upon the termination of the policy due to the duration). The death benefit in this policy does not change throughout the duration of the life insurance contract. So, if the policy was issued at age 40, the duration of the contract would be 60 years.

The straight life policy accepts only what are called level premiums. These are premiums that are the same each year and for the duration of the contract. They are payable premiums, which means that the policy owner can make payments to the company, or he/she doesn't have to. If the policy owner discontinues making premium payments, then he/she will receive the cash value of the policy. Also, this may be a moot point, but premiums are no longer payable after the insured dies. However, some people don't realize it, which is why we are referring to it here.

The cash value in this policy steadily increases each year that the policy continues. Let's take an example. If a $100,000 straight life insurance policy is issued at age 35, the cash value might be $5,000 after five years, $12,000 after twelve years (notice the dramatic increase), $28,000 after twenty years, and eventually, $100,000 after 65 years. This makes sense because in this policy, the death benefit is paid after the insured turns 100 (if he/she lives), so the cash value equals the death benefit at this time.

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