Definition of Whole Life Death Insurance
Whole life death insurance is a life insurance contract in the event of death whose purpose is to provide for the payment of capital to the beneficiary designated in the contract in the event that the insured dies.
Purpose of whole life death insurance
Unlike so-called term death insurance, whole life death insurance is generally taken out with a view to inheritance. Its purpose is to promote the transmission of capital to the designated beneficiary(ies) by taking advantage of reduced taxation. Indeed, as in all life insurance, the capital is transmitted to the beneficiary outside the estate.
To note : temporary death insurance is a provident contract whose purpose is to compensate for the premature death of the insured person by the payment of a capital sum to the beneficiary(ies) designated in the contract in return for the payment of a prime
Whole life death insurance also makes it possible to protect a vulnerable person (disabled or low-income person) or to provide liquidities to the heirs to face inheritance taxes, thus avoiding the sale of part of the assets constituting it.
How whole life death insurance works
The insured person himself sets the amount of capital he wishes to see allocated at the time of his death to the beneficiary(ies) he has designated in the contract. In return for this capital, he undertakes to pay one or more premiums to the insurer. The number of installments varies according to the formula chosen:
- Only one premium in the case of a single premium whole life death contract.
- A number of premiums fixed in advance over a determined period in the case of a temporary premium whole life death contract.
- A regular payment of premiums until the death of the insured with regard to the whole life death insurance contract with life premiums.
But, if the number of premiums paid varies according to the formula chosen, the duration of the guarantee remains lifelong and the settlement of the contract will occur on the death of the insured.
Particularities of whole life death insurance
Unlike temporary death insurance, the contribution of which takes into account the age of the insured, the age of the subscriber has no direct impact on subscription, because the essential element is the fixed capital.
A lifetime guarantee and a certain hazard
This contract will have a higher cost than that of a temporary death insurance. Indeed, the hazard (the risk of death) of whole life death insurance is certain, since it is a lifetime guarantee, the contract will be settled with certainty on the death of the insured. The only uncertainty lies in the date of occurrence of this one.
Capital at term intended for the sole designated beneficiary(ies)
While traditional life insurance provides for the attribution of the capital under the terms of the contract to the insured/subscriber himself if he is still alive, the whole life death insurance contract systematically implies the attribution of the capital to the (x) designated beneficiary(ies), when the insured dies, regardless of the date of occurrence of his death.
Good to know : certain so-called “whole life with deferred effect” contracts allow the insured to adjust the date of payment of the capital (for example to wait for the majority of the beneficiary).
A possibility of redemption
While traditional term death insurance is taken out on a non-refundable basis, whole life death insurance may include a surrender clause allowing the insured to take back all or part of the paid-up capital (this, of course, provided that the beneficiary has not accepted the benefit of the contract or has made known in writing its agreement to authorize the redemption).
Good to know : total redemption results in the termination of the contract.
A possible reduction of the contract
While stopping the payment of premiums systematically leads to the end of the guarantee in a temporary death contract, in whole life death insurance, the insured has the possibility of stopping the payment of premiums at any time before his death. In this case, the contract remains in force and the guarantee remains for the benefit of the persons designated in proportion to the contributions paid. This is called the reduction value of the contract; this, proportional to the premiums paid, will be paid into the hands of the beneficiary(ies) on the death of the insured.
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