Whole life insurance is a permanent plan of life insurance that provides a guaranteed cash value. Some carriers that offer whole life insurance also offer dividends in addition to the guaranteed cash value. The guaranteed cash value grows at a more rapid rate when the premium payments are shorter, such as with the 10 pay whole life plan. 10 Pay Whole Life is a variation of a whole life policy that typically requires premium payments to age 100 or beyond in order for the policy to be fully paid up.
What does fully paid up mean in this instance? Fully paid up refers to the time when the whole life policy no longer requires premium payments to maintain the original death benefit. It’s up to each individual to determine whether this is the right plan for you.
Making the right choice in insurance plans
Some individuals in their peak income earning years may be in a more comfortable position to pay the significantly higher premiums of a “10 pay” policy rather than pay lower premiums throughout their retirement until age 100 or beyond as with a traditional whole life policy.
The “10 pay” insurance policy is a straightforward product. An insured/policy holder makes 10 payments to the contract and after that the policy is guaranteed as paid up at this point. Not surprisingly, a given level of death benefit for a “10 pay” product will have a considerably higher required premium than a whole life policy that requires premium payments for a longer period of time (for example, to age 100).
The product, as it stands, is well known for its higher rate of return for both cash value and death benefit given premium vs. other whole life products, but the market for “10 pay” life insurance policy is considered to be pretty thin. As it turns out, there are those insurers participating in whole life insurance that have entered the 10 pay market recently and now may be a good time to compare those products based on the performance among those participating in this market at the present time.