Whole Life Insurance
Whole life insurance is guaranteed coverage with many benefits.
What is Whole Life Insurance?
Whole life insurance, also called permanent insurance, is a combination of life insurance and investment that lasts your entire life. The life insurance portion is the benefit amount your beneficiaries receive when you die; the investment portion is the portion of your premium that is stored in a cash account. The terms of a whole life policy are set up when the policy is issued.
Whole Life as an Investment
You can use the cash account in a number of ways--you can withdraw money from the account, you can borrow against money in the account, or you can leave it there to increase the final death benefit to your beneficiaries. After the policy has been in force for a few years, and the cash value has built up, you can even use accrued money to pay your life insurance premium.
For tax purposes, most people recommend that you borrow against the cash account rather than withdraw cash so you do not have to pay income taxes on the money. When the insurance benefit is paid, the amount is reduced by any amount you have borrowed.
Types of Whole Life Insurance
There are different types of whole life insurance. Two of the main types are:
• Participating whole life. This policy pays dividends; when the company has earnings, a portion is paid to you. You can have dividends sent to you as cash or invested in your cash account.
• Non-participating whole life. This policy does not pay dividends, but may be a little cheaper.
For both participating and non-participating policies, different payment options are also available:
• Level premium whole life. You pay the same premium annually for your entire life.
• Limited payment whole life. You pay larger sums on a less regular basis.
• Single premium whole life. You pay one large sum and are covered for the rest of your life.
A participating policy generally costs more than a non-participating policy, but you may make that money back in dividends. Which policy you choose depends on how much money you can spend on your premium at any given time. All of the different types of whole life insurance cover you for your whole life and have cash accounts that build over time.
Who Benefits Most From a Whole Life Insurance Policy?
There are a variety of reasons to buy whole life insurance. If you know for a fact that no matter when you die, your beneficiaries will need assistance, whole life insurance is probably the best choice for the following reasons:
• Whole life is intended to cover your entire life, if you become seriously ill your coverage and premium are not affected.
• You have a large estate that will incur heavy taxes when your beneficiaries receive it. You can buy a whole life policy to cover these taxes.
• You have a disabled relative or child who will never be fully financially independent.
These are only a few of the reasons whole life insurance may be the best choice for you. Get whole life insurance quotes today to find the right policy for your family situation!
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