As its title indicates, whole life insurance provides a lifetime death benefit for a set premium amount and builds cash value which you can access and use while you are living.
When you purchase a whole life insurance policy from a privately held (mutual company) firm, you are the policy owner as well as the shareholder, and the dividends and guaranteed rate of return will come back to you. All life insurance companies sell whole life insurance until they go public. Once they are public though, there are different shareholders and most companies will pay policy owners very little or no dividends. So if you plan to buy a whole life policy, please buy it from a mutual company.
In whole life insurance the premium duration varies. Most companies have you covered until age 121. You can decide to pay the whole life premiums off in 10, 20, 30 terms or until age 65, or you pay until age 121. The shorter the premium paying period, the higher the premiums.
You can always take a loan from your policy, usually 80-90% depending on your age. You are also allowed to withdraw the dividends from your policy without taking loans.
In conclusion, opt for whole life insurance policy if you have maxed out your 401k and other retirement accounts. Purchase the policy with a calculated term to cover your liabilities, and you will have money as a contingent to cover any risk.
The strength of a whole life insurance policy is that it provides guaranteed cash values and benefits in return for fixed premiums. A trade-off to consider is that a whole life policy may build cash value at a lower rate than alternative coverage options.
Who Should Buy Whole Life Insurance?
A whole life insurance policy is recommended if you want permanent insurance and more complete guarantees than a universal life policy. While the premiums are high, you’ll receive a lifetime of coverage at a set premium with a guaranteed death benefit, and cash value that you’ll be able to borrow against over time. When a term life insurance ends, your coverage ends. Whereas in whole life the coverage is as the name suggests for your whole life. Whole life insurance is very different from other life insurance plans. Understanding how they work will help you to know the product better.
The key benefit of whole life insurance is that it gives you cash value after a specific period of time which can be used for your personal expenses. In simple words, you don’t have to die to reap the benefits of the policy.
- Permanent Coverage
- Cash Value
- Retirement and Estate Planning