And, in some cases a health condition may arise which would prevent you from being able to renew coverage at any cost. With some whole life plans, you will pay premiums for only a certain period of years or until a certain age. At that point your premiums cease but your death benefit coverage remains in effect forever. Alternatively, the cash values can normally be borrowed from the life insurance company. Interest is charged on this loan, and the loan is deducted from the policy cash value if surrendered or from the face amount if a death claim is paid.
Annual dividends are another source of policy values for some whole life policies.
With term plans, a death benefit is paid only if death occurs during that term of years. This type of coverage provides the largest immediate death protection for the premium dollar. It is frequently used by young families to provide significant and immediate death benefits at the lowest cost. Premiums for the new policy will be higher than you have been paying for the term insurance. Dividends Premiums for participating policies are usually based on fairly conservative mortality, interest, and expense assumptions.