Whole life insurance offers protection throughout your entire life. In most cases, your death benefit and premium will remain the same throughout the life of the policy. This article will give you some guidance and counsel when considering whole life insurance.
Whole life insurance gives you a benefit you don’t get with term life insurance. The benefit is that insurance companies will invest a portion of your premiums. You can earn cash value on the premiums you pay which, in turn, could pay off the entire life premium in a matter of years. The cash value is tax-deferred until you withdraw it, and you can borrow against it.
There are a few different kinds of whole life insurance. One type of whole life insurance is traditional. Traditional whole life insurance gives you a guaranteed minimum rate of return on the cash value portion of the premium investment. Another kind of whole life insurance is interest-sensitive, which gives you a variable interest rate on your cash value portion, similar to an adjustable rate mortgage. The third type of whole life insurance is single-premium whole life insurance. With this type, you pay off the premium in one single lump sum of money. The whole policy is paid for up front. Single-premium whole life insurance accrues a cash value and has the same tax shelter on returns.
Many insurance agencies will suggest a “one size fits all” whole life insurance policy. In reality, you may not need a financially huge policy. If you are well-to-do or and have some source of income to take care of your family, you may not need a whole life insurance policy at all. But if you have certain financial obligations, such as a mortgage payment, responsibility for children’s educational needs or other financial interests, you should probably have a life insurance policy.
Whole life insurance will require you to pay a lifetime of premiums unless you pay the premium in one lump sum or if the cash value of the investment is doing well. However, for many people, whole life insurance may be coverage that is unnecessary. If you die at age 85, will your spouse and kids really need $500,000? Just make sure you know what to expect when purchasing whole life insurance.
That is another reason why it is important to shop around for an insurance agency. Don’t just settle with the first whole life insurance quote you find. Do some shopping and contact a number of different insurance agencies. You’ll be surprised to find that many companies offering the same coverage will quote various premium rates. Track down a company and premium you feel comfortable with.
Last of all, don’t forget to name the beneficiary or beneficiaries on the whole life insurance policy. These beneficiaries are the ones who will receive the death benefit when you die. It is important for you to select a responsible beneficiary who will disperse the funds and meet any and all financial obligations. The beneficiary is usually a spouse or other immediate family member that you trust implicitly.
By John Ivie