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Choosing the Best Whole Life Policy for Your Needs

By Compuquotes Team on October 15th, 2009

According to MSN Money, whole life insurance offers unique advantages over term life if you plan to keep the policy for more than twenty years. Choosing the right life insurance for you involves knowing the types available, determining your financial needs and understanding the selection of riders and terms.

Whole Life Insurance Types

Increased competition in the life insurance market has diversified the types of whole life insurance policy types available. Each type offers you a variable range of stability based on your investment personality.

� Traditional Whole Life. Features guaranteed premiums, cash values, and death benefits--ideal for the conservative investor.
� Universal Life. Offers maximum premiums and minimum cash values and death benefits, but delivers greater payment flexibility.
� Variable Life. Supplies the fewest guarantees but offers the greatest potential for ending cash value; it's typically delivered through mutual funds.

Determining Your Life Insurance Requirements

Determining how much whole life insurance you should purchase begins with a basic mathematical formula. Keep in mind that your calculations are only designed to give you baseline data that your insurance agent will work from as you select your coverage.

Start with any outstanding loan balances--credit cards, student loans, auto loans, home mortgages, and home equity lines of credit. Add expected funeral and burial costs, medical bills, estate taxes, and fees. Then figure your projected annual income--as much as two years worth of household support minimum. Factor in dependent costs that your spouse may need, such as college tuition and medical expenses.

Finally, subtract Social Security, pension payments, retirement accounts, and any other investment income you will pass on to your heirs. The number you arrive at is a ballpark estimate of the amount your whole life insurance policy should cover. Your insurance agent may make specific suggestions based on your lifestyle and future expectations. Beware of the agent that attempts to oversell you; those who work on commission get paid more on a larger policy.

Whole Life Insurance Add-ons

There are a selection of additional benefits that you can add to your whole life insurance policy to sweeten the protection. Each comes with its own provisions and increases the cost of the life insurance premium.

� Accelerated Death Benefit. Added for the privilege of withdrawing up to 90% of your policy in the event of a terminal illness.
� Accidental Death and Dismemberment Benefit. Pays an additional benefit should you die as the result of an accident; the dismemberment rider provides a smaller benefit should you lose sight, hearing, and/or a limb
� Guaranteed Insurability. Protection if the insured becomes unable to qualify for insurance in the future.
� Paid-up Additions. Added if you anticipate withdrawing some of your policy before your death.
� Riders and Terms. Additional provisions in your policy that allow for exceptions to the general whole life rules.

As with any financial investment, consult a professional for guidance. Understand each section of your whole life insurance policy before you begin making premium payments. Some policies don't allow you to make changes once they are in force.

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