Componential analysis
Whole of life insurance
Whole (of) life insurance
• Whole life insurance offers the policyholder a
cash value account and tax-deferred cash
accumulation and pays a death benefit directly
to the named beneficiary. The policy is in effect
during the lifetime of the insured and provides
permanent security for all your dependents while
building a cash value account. […]
• There are several different types of whole
policies. They are as follows:
Single premium whole life
• Single premium whole life policy is when
the policyholder pays whole life premium
in one lump sum. The only benefit to this
policy is tax advantages. The regular life
policy grows in response to the interest
rate and the growth is then tax deferred. If
a client wants to shelter some money and
would want death benefits, the single
premium would be an excellent choice.
Continuous premium life
• Continuous premium life (aka straight
life) policy is the most common whole life
policies. This policy accumulates in cash
value and provides lifetime protection with
level premium payments up to the age of
100. This policy offers the lowest regular
premium cost among the permanent
policies.
Limited pay
• Limited-Pay policies are paid over a limited
period of time. Each type of plan is named after
the terms of the payment period (i.e., "20-Pay
Life," or "Life Paid-up at 65"). The payment
amounts are determined according to length of
the payment period. In addition, the insurer must
pay the full, insured amount to the beneficiary in
the event that the policyholder dies, even if the
insured has only made one payment to the
policy.
Current assumption whole life
 Current Assumption Whole Life
 (aka Interest Sensitive Whole Life)
premium payments fluctuate according to
the current interest rates. The premiums
are adjusted upon renewal of the policy.
Preparing the analysis
1. All the forms of whole of life insurance
inherit all the features of the hyperonym.
2. The sub-classes all have additional
features.
3. Certain features distinguish the various
sub-classes.
4. These features should be expressed as
present or absent.
Distinguishing feature?
• the premium
– Sum paid by the policyholder to the insurer in
return for cover
Two features relative to the premium are
mentioned…
which ones ?
When the premium is paid
• in a lump sum
• over the whole of the life
• over a set period
Premium constant or variable?
• Single premium
• Continuous premium
• Limited pay
– Constant
Current assumption
- variable
Whole of life: features
WoL lumpS WoL SetP
single
+
continuous +
limited p +
current a +
•
+
-
+
+?
WoL: Whole of life, lump Sum, set Premium
rate C
+
rate constant
+
+
-
definitions
• single premium whole life insurance
– whole of life insurance for which the premium is paid
in one lump sum
• continuous premium whole life insurance
– whole of life insurance for which the premium is paid
over the whole period (or until the age of 100)
• limited pay insurance
– whole of life insurance for which the premium is paid
over a period defined in the policy
• current assumption insurance
– whole of life insurance for which the rate of the
premium is indexed on interest rates