The great thing about being young is the number of options available. This applies to whole life insurance as well. I will discuss four whole life options for young adults: simplified issue whole life, fully underwritten whole life, limited pay whole life, and single premium.
Simplified issue whole life is the easiest to sign up for. Only a handful of underwriting questions are asked and most of the time you have an underwriting decision before the agent walks out the door. This type of policy is highly recommended for seniors, but young people usually have better options.
Fully underwritten plans are good for young adults, but not for older adults. Of course this is a generalization. There are certain circumstances where I would recommend the opposite. Fully underwritten doesn’t always mean medical exams. There are no medical exams if the policy is small enough. A physician statement might be required (a statement from your doctor claiming you are in good health). Physician statements don’t require any effort from the applicant, but they do slow down the underwriting process since doctors typically view physician statements as a low priority.
The next type is limited pay whole life. This type of policy has advantages. The first advantage is the limited number of payments before the policy is paid up in full. You can have the policy paid up in 10, 15, or 20 years. You can even have the policy paid up at a certain age, like when you’re 65 or 85. The other advantage is having a policy paid up before you retire. Paying for life insurance in retirement can sometimes be a heavy burden. There are two versions of limited pay whole life: simplified issue and fully underwritten.
The last type is single premium. This type gives you whatever coverage one premium payment can buy. This is a one and done deal. The biggest downside to single premium plans is the lack of tax advantages (the IRS treats these plans less favorably than other plans).