Advantages of Whole Life Insurance

Life insurance policies tend to fall into two very different categories, namely, whole and term. The main difference will be that a term life insurance policy is simply that, life coverage only and for a specified term or period of time. A whole life insurance policy will not expire during your lifetime, and as the name implies, will provide coverage for the whole of your life. With that said, many whole life insurance policies may only cover you up to the age of 100.

You will also find that a whole life insurance policy will typically build up a cash value. Whole life insurance will also generally offer fixed premiums, as opposed to the increase in premiums that can be found in many other types of term life insurance policy. The cash value feature of a whole life insurance policy is also guaranteed. It is critically important to realize that no matter which type of life insurance policy you have, you must pay the full premiums in order to have continued coverage.

Whole life insurance is considered to be a great choice for those long-term goals, especially as it has fixed premiums and will accumulate a cash value. All whole life insurance policies will feature a savings element that will allow you to build up a cash value that will be paid out as a tax-free lump sum. You are able to cancel or surrender this type of life insurance policy any time you wish, and you will still receive the cash value that has been generated in that time. Another advantage of whole life insurance policies is that they often generate a far larger cash value than the original guaranteed amount. This will, of course, very much depend on how the market performs.

You will typically find that the cash value of a whole life insurance policy may be affected by the future performance of an insurance company, although there is always a guaranteed cash value. This is not the case with variable life insurance policies which are unable to guarantee a set cash value. Many people also choose to borrow money against the cash value of a whole life insurance policy, and this will generally be issued on a loan basis. It is believed that the cash value of a whole life insurance policy is able to compete extremely well with any other form of fixed income investment.

Possibly the most valuable benefit of having a whole life insurance policy is the ability to earn dividends. The insurance company from which you purchase this policy will base the overall return on the investments that make up your policy. You will also find that the interest on a whole life insurance policy will be adjusted annually, whereas other types of life insurance policy will adjust interest monthly. This is likely to work to your advantage. There is no one set whole life insurance policy, and you will typically find that there are various options for you to choose from.

It is important that you budget for a whole life insurance policy, and should never consider purchasing one unless you absolutely know that you can afford it. Whole life insurance will generally have far higher premiums than a term insurance policy, but this is because they are able to protect you for your whole life. One of the most attractive features of a whole life insurance policy is the fact that they have fixed level premiums and a fixed death benefit. However, you should be aware that you will not be to decrease your premium payments on a whole life policy, although other types of insurance policy will allow you to do this.

You will typically find that many agents may try to promote term life insurance over a whole life policy. They will highlight the fact that the premium is much lower, although in the long run this may prove to be extremely deceptive. It is true to say that a whole life policy may generally cost twice as much as a term life policy. However, as a whole life policy will provide coverage for the rest of your life, you may actually find it cheaper. Once you reach the end of a term life insurance policy, you may try to renew this again, although you are likely to find that the premiums are far higher as you are obviously a lot older than when originally took the policy out.

A whole life insurance policy may also provide you with additional assets during your retirement. Once you have retired you may decide that you no longer need as much life insurance, and you actually have the opportunity to convert some of your funds into a fixed annuity. This will then provide you with an income for the rest of your life, whilst still keeping some form of life insurance in place. As mentioned, you may also use a life policy as a source of emergency funds. It is obviously not advisable to borrow against a life insurance policy unless you deem it to be absolutely necessary. This type of borrowing should always be looked upon as a last resort, but it can provide help in your hour of need. The beauty of borrowing against a whole life policy is that you will not in fact have to repay the loan, but simply pay the interest amount each year.

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