• There are two main types of whole life insurance, distinguished by how premiums are priced and how policy risk is allocated.
• Single Premium: This is the most basic type of whole life insurance. The insured pays a fixed premium, which continues to accumulate as cash value and provides coverage for as long as premiums are paid.
• Limited Payment: This type of policy features higher premiums in the early years of a policy, with lower or no premiums in later years.
• Modified Premium: The opposite of a limited payment policy, this type of whole life insurance offers lower premiums in the early part of a policy's lifetime.

Whole life insurance policies are further distinguished into participating and non-participating plans. With a non-participating policy, any excess of premiums over payouts becomes profit for the insurer. However, the insurer also assumes the risk of losing money.

With a participating policy, any excess of premiums is redistributed to the insured as a dividend. This dividend can then be used to make payments or increase one's policy limits.

Whole Life Insurance Cash Value

A cash value life insurance policy is similar to a retirement savings account, in that it allows investments to accumulate tax-deferred interest.

Part of each premium payment goes towards the policy's cash value, which can be withdrawn or borrowed against later in life. The cash value of a life insurance policy grows quickly when the insured is young, but it grows more slowly as they get older, due to the higher risks associated with age.

The insured can access the cash value of their policy by borrowing against the cash value, or by withdrawing money in a partial cash surrender. Surrenders will diminish the final death benefit of their policy. You can also use the cash value to cover your monthly premium payments instead of paying out of pocket.