| Life insurance
falls into two categories: whole and term. Term life
insurance is life coverage only. Whole life insurance
does not expire for a lifetime as long as you continue
to pay the premiums. Whole life insurance provides coverage
for the whole life or until the person reaches the age
of 100. Whole life insurance policies
build up a cash value. This usually begins after the
first year. With whole life insurance, you pay a fixed
premium for life instead of the increasing premiums
found on renewable term life insurance policies. In
addition, whole life insurance has a cash value feature
that is guaranteed. In both term and whole life policies,
the full premium must be paid to keep the insurance.
Like many insurance products, whole life insurance has
many policy options. Whole life insurance provides a
minimum guaranteed benefit at a premium that never changes.
One of the most valuable benefits of a participating
whole life insurance policy is the opportunity to earn
dividends. The insurance company sets earnings based
on the overall return on its investments
on a whole life policy. In addition, while the interest
paid on universal life insurance is often adjusted monthly,
interest on a whole life policy is adjusted annually.
Whole life insurance is a good choice for long-range
goals because of the level premiums and the accumulation
of cash values. Whole Life Insurance features a savings
element that allows you to build cash value on a tax-deferred
basis. The policyholder can cancel or surrender the
whole life insurance policy at any time and receive
the cash value. Depending on interest crediting rates
and how the market performs, some whole life insurance
policies may generate cash values greater than the guaranteed
amount. The cash values of whole life insurance policies
may be affected by a life insurance company's future
performance.
Unlike whole life insurance policies, which have guaranteed
cash values, the cash values of term life insurance
policies are not guaranteed. You have the right to borrow
against the cash value of your whole life insurance
policy on a loan basis. Supporters of whole life insurance
say the cash value of a life insurance policy should
compete well with other fixed income investments.
Whole life insurance policies have the highest premiums
because it is insurance for your whole life, no matter
when you pass on. Do not buy whole life insurance unless
you can afford
it. It’s important to ensure that you can budget
for whole life insurance for the long term. You should
buy all the coverage you need now while you are younger,
and if you cannot afford whole life insurance, at least
get term. The level premium and fixed death benefit
make whole life insurance very attractive to some. Unlike
some other types of permanent insurance, with whole
life insurance, you may not decrease your premium payments.
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