The basic concept behind an insurance scheme is one of mutual benefit, where the intending person contributes a stipulated amount by way of Premium to the Insurer in order to secure some specified benefits. A sizeable fund is thus created at the Insurer’s disposal all of which is not payable at a time in lump sum- but dispensable sparingly as and when called for. Against this general conceptual backdrop, the special relevance and significance of Life Insurance have to be emphasized. Over and above being a financially beneficial scheme, Life Insurance has come up to provide social security as the declared beneficiaries in such policies get certain stipulated cash benefits on the eventuality of the death of the insured. Such cash returns, though, have diversified over time into various other benefits as well, such as Investments, financial protection to the spouse, education of the named dependents of the deceased etc. etc.

Whole Life Insurance Working Formula 

Whole Life Insurance is one of the most equipped and a long term Life Insurance Scheme out there. It justifies its name as it serves your whole life and even after death, protection from any untowards incident that may occur to you or to anybody mentioned as beneficiary. In this scheme, at first you are quoted with a premium and also with a death benefit at the start of your policy and this policy remains static throughout the life. This very reason and the consistent nature of this scheme makes it one of a kind and very desirable! The working of a Whole Life Insurance is simple and rigid. Though it can get expensive when compared to the limited life insurance, popularly known as the Term Life Insurance, the secured definite guarantee of the death benefit is one of the most important factors here. But there is a catch and that is your premiums should meet properly from time to time. And this premium will be invested by your insurer supporting and favoring the accumulation of ‘cash value’ which will in turn help you to use this revenue in many other options including premiums, investment or reinvestment and also can just be saved, increasing the cash value base. The whole thing depends on you and your choices.

So one thing that comes to mind after reading this is what exactly is ‘cash value’? Are you thinking that it is something related to ‘face value’? No, not at all! ‘Face value’ is that amount that you wish to offer your beneficiaries after death and on the other hand ‘cash value’ is the amount that is accumulated in the policy itself as long as you meet your premiums every time.

US In The New Era Of Innovative Insurance


Insurance activities are no longer centered around the age old fundamental concepts of Life Insurance that focus on the lifetime endowments as well as after death protection of the dependent survivors of the policy holder. The Life coverage concept has outreached the basic needs of Life Insurance that is ensuring the death benefits of the insured. It has ventured into the stock market as well as the money market by allocating funds out of a cash build up account maintained along with the main policy account. What the clients are expected to do is, pay the premium with some additional contribution so after the basic premium servicing a part of the fund is diverted to aforesaid cash account. The insurer is duly authorized under the basic contract of the Insurance to invest in stocks, bonds, gilt-edged securities as well as mutual funds. This secondary function undertaken by the Insurer is termed as participation in the stock market. Due precautions are observed in then matter of securing the client’s prior consent by furnishing statutory equity linked documents such as prospectus, brochures of the company in which the funds are so invested.

Another meaningful step taken in the direction of securing client’s paramount interest is constitution of an apex controlling and monitoring authority named Irrevocable Life Insurance Trust (ILIT). USA has proved to be an avant-garde in forging this breakthrough in the realm of Life Insurance. It is a fiduciary body set up by the US government in order to bring together all operators under a single umbrella. A common capital pool is created to facilitate the individual ‘risk carriers’ (bank agencies) to compare their respective Insurance costs to those of others. If a policy falls defaulter due to inadequate or non-payment of premiums, it is no longer allowed to lapse and marked ‘paid up’ as per old practice. The death benefit is retained in the account intact subject, however, to a prescribed minimum. These policies continue to remain in force upto a minimum guaranteed period even if they have zero or inadequate funds in the ‘cash value’ account. Constitution of ILIT, thus, helped the operators immensely in maintaining sticky or delinquent accounts effectively. And all this falls under three main categories of Whole Life Insurance: Universal Life Insurance, Variable Life Insurance and Variable Universal life Insurance.

Is it the right scheme to go for? The advantages and disadvantages are as follows:


  • The consistency of this scheme is unmatched and also the protection for life;
  • The secured death benefit to your beneficiaries if anything happens to you provided you have cleared the required premiums on time;
  • The premiums are same all throughout the policy;
  • Benefits in the form of ‘cash value’ it will increase year after year;
  • And lastly, the tax advantages that come in built with the policy.


  • Going for this scheme leads to expensive premiums as compared to others;
  • If a circumstance arise that you do not need a life insurance scheme like this in the rest of your days that means it can lead to overspending.
  • If the coverage lapses early it can be very costly.

So, every Life Insurance scheme has its fair share in the market, its completely dependent on you on what to choose and when to go for but make sure to do one thing before choosing it, choose it carefully.