Extra-ordinary life insurance may refer to one of several products in the life insurance industry. The policy is a brand name used by companies like The Hartford and Northwestern Mutual. Before you purchase a policy, you should understand the basic idea behind this kind of whole life product and what the long-term effects of this policy could be on you and your family.
Extra-ordinary whole life is a brand name for whole life insurance used by at least two life insurance companies. The Hartford's vision of Extraordinary Whole Life is a non-participating whole life policy. This means that the company does not pay dividends to the policy. Cash value is accessible through policy loans. However, premiums made to the policy are flexible and more premium may be added to the policy than the contractually guaranteed minimum premium amount.
Northwestern Mutual offers an extraordinary whole life policy that allows you to split whole life and traditional term life insurance, blending the two policies together. The result is a policy that offers permanent life insurance protection through a permanent whole life base policy, but which also has costs that are lower than a whole life policy due to the addition of term life insurance to the base policy. Over time, the term life component of the policy is converted to whole life insurance.
The policy offered by Northwestern Mutual is a participating policy, which means that the company shares its profits with policyholders in the form of a dividend payment that is paid to the policy. These dividends go to buy additional paid-up life insurance death benefit. The additional paid-up life insurance death benefit replaces the term death benefit.
In both cases, the extraordinary whole life policy is a whole life policy with additional features not normally found with most whole life policies. In the case of The Hartford, you get the benefit of adding more premium than what is required by the policy. This translates into higher cash value amounts than you would otherwise be able to get from a whole life policy. With Northwestern Mutual, you get the additional death benefit you need at a price that is lower than what you would otherwise have to pay for permanent whole life protection.
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The disadvantage to extraordinary whole life is one shared with many whole life policies. The premiums required to pay for the death benefit are higher than term life policies in the early years of the policy. As a result, you may not be able to afford the policy, even though it offers long-term benefit.
When deciding on whether to purchase a policy that has been branded as extraordinary whole life, make sure you read over the product literature from the issuing company. In addition to this, ask your life insurance agent to explain to you how the policy differs from any other type of whole life policy. There should be a significant benefit to you. Realize that you'll have to pay premiums that are higher than other types of life insurance, at least in the early years of the policy. You must make a budget that accommodates these higher premiums over the long-term.