Whole Life

• Whole life insurance is also called straight or permanent life insurance. It refers to life insurance that lasts the life of the policyholder (or until they turn 100) and offers no change in payments. Generally payments are higher than regular life insurance policies, and the life insurance payments do not mature for the first couple years. If the policyholder dies in these first years, the insurance company pays back only the premiums it has received with a minor percentage increase of the total.
  
  

Uses

• Graded whole life insurance is used by those who are sick or have medical conditions that are permanent or likely to last their entire lives. These conditions include diabetes, heart disease, disabilities that confine people to wheelchairs, and many others. Typically, people must also be above the age of 50 in order to buy this type of policy.
  
  

Benefits

• Graded whole life insurance policies rarely require even a medical questionnaire. Often, these policies are the only option that some elderly or sick people have left. This allows them to raise enough money to cover funeral costs and support their families in case of their death. Most of the policies include automatic accident benefits that immediately pay the insurance in case of an accidental death not related to medical causes.
  
  

Considerations

• For the first two years, most graded policies will offer only the premiums that have already been paid, in addition to 10 to 20 percent extra. Only after two years does the policy mature, and the insurance company will pay the full amount. This requires families to do some tragic guesswork, since the policy is ideal for someone who will live past two years but die within five to seven years.
  
  

Graded Premium

• Graded premium life insurance refers to the premiums that policyholders must pay. For the first several years the payments are graded: They start at a low amount, usually an amount far lower than the average life insurance payment, and they increase by set increments for a number of years after that. Eventually, the payments level out and become fixed for the duration of the loan. This loan acts the same way as whole life insurance, but the payments change instead of the coverage options.