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Find the Best Whole Life Insurance Policy For Your Needs

By Tes Kurtz on December 11th, 2009

There are a lot of choices when it comes to life insurance. With so many different options, it may be difficult to know which is the best policy for you. The first thing you should consider is whether you want a whole life insurance policy or a term life insurance policy.

Whole Life versus Term Life

Otherwise known as permanent coverage, whole life insurance provides you with coverage for your entire life. If something should happen to you prematurely, whole life insurance ensures that your family is financially protected.

Term life insurance provides similar coverage, but only for a pre-determined period of time. Term lengths vary, but are usually 20 or 30 years. Typically, premiums for term life insurance policies are lower than the premiums for whole life insurance coverage.

Depending on your needs, you may decide that whole life or term life is the best option for you and your family. If you decide that whole life insurance best meets your financial goals, then the next step is to figure out the type of whole life insurance that is most beneficial for you and your family.

There are six traditional types of whole life insurance policies available:

  • Non-participating whole life insurance
  • Participating whole life insurance
  • Limited payment whole life insurance
  • Single premium whole life insurance
  • Indeterminate premium whole life insurance

Each whole life insurance policy has its advantages. By reviewing each policy type, you can find the best fit for you and your family.

Non-participating Whole Life Insurance

The most straight-forward of all whole life insurance types, non-participating whole life insurance has a flat-rate premium and face value (the sum paid to the beneficiary when the insured dies) during your lifetime.

The policy's values, such as death benefits and premiums, are typically determined upon issue of the policy. Fixed costs and relatively low premium payments are a big advantage here. However, the downside is that you are not paid dividends.

Participating Whole Life Insurance

The term, participating, means that you receive dividends from this whole life insurance policy. The insurance company pays excess profits from investment earnings, favorable mortality, and expense savings to policyholders. These payments are typically non-taxable because they are considered a premium overcharge and can be placed in your hands in several ways:

  • Cash paid to you directly
  • Used toward reducing premium payments
  • Left in your policy to accumulate at a specified interest rate
  • Purchase additional, paid-up insurance (the premiums are paid up front) to increase the value of your policy

Limited Payment Whole Life Insurance

Limited payment whole life insurance refers to a policy that has higher premium payments for a set period of time. The higher premium payments are scheduled so that the whole life insurance is paid for in a set amount of time--typically ten or twenty years.

What is the advantage of the truncated payment schedule? If someone does not want to make insurance premium payments after retiring, they can pay the premiums off in ten or twenty years and never have to think about premiums again.

Single Premium Whole Life Insurance

Single premium whole life insurance is paid for all at once. The policy is paid in full right away and no further premiums are necessary. The cash value and loan value are available immediately. Depending on how substantial the single premium payment is, this type of whole life insurance plan could be viewed as more of an investment.

Indeterminate Premium Whole Life Insurance

This whole life insurance policy is also known as non-guaranteed premium whole life insurance or variable premium whole life insurance. Indeterminate premium whole life insurance plans are much like non-participating plans; however, the difference is that the rate fluctuates based on insurance costs. The policy specifies a cap (the maximum guaranteed rate) and a lower rate (the premium rate at policy purchase). The lower rate is guaranteed for a specified period of time. When that time period expires, the insurance company can increase or decrease the premium based on its current estimate of investment earnings, actual mortality, and expenses.

Summary

Whole life insurance is an important security blanket for anyone with a family. Losing somebody is hard enough. Why burden the ones you love with financial hardship? Life insurance cannot heal the heart, but it can make life financially easier if something unexpected were to happen to you.

Find the life insurance policy that's right for you and your family by comparing whole life insurance quotes for free from multiple insurance companies. Just enter your zip code to get started.

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