Describe a Blended Insurance Policy

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The Answer is A blended insurance policy is a mixture of term and whole life insurance. That is, a portion of the insurance coverage is whole life and the remainder is term insurance. On the whole life part of a blended insurance policy, the insured pays a level premium for life. That guarantee is possible because the premium is much higher than is really needed to cover the insured in the early years; the excess goes into a side fund that is used to pay for the death benefit later when the premium payments progressively increase. The more term life there is in the mix, the lower would be the annual premium in the early stages and the greater would be the risk of premium escalation at a later stage. Naturally, the total annual premium in a blended policy is not guaranteed for life.
The term/whole life blend would be impractical without mixing with it the third ingredient of dividends. Whole life policies typically pay annual dividends which can be used to purchase additional whole life insurance. As the portion of whole life insurance in the blended policy increases, the portion of term life gradually declines. So in a likely scenario, by using future dividends, in about 20 years a 50-year old might be able to transform a blended policy into a 100 percent whole life insurance plan, thereby insuring a level premium for the rest of his or her life.

Describe a Blended Insurance Policy

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Describe a Blended Insurance Policy

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