Every insurance policy has a maturity date. Whole life insurance is insurance that covers the insured for their entire lifetime. Plus, it comes into effect when the individual enters into a whole life insurance contract. Also, it takes place with the Insurance company the individual chooses. It remains in effect for as long as the insured honors the payment of the premiums.
- 1 What Makes Whole Life Insurance Different?
- 2 What are the Benefits of Whole Life Insurance?
- 3 How Much Cash Value Accumulates on a Whole Life Insurance Policy?
- 4 Questions to Ask When Considering Whole Life Insurance
- 5 Buying Whole Life Insurance from the Right Insurance Company
What Makes Whole Life Insurance Different?
The big difference with whole life insurance is the term of the policy. For example, with term life insurance there is a specific period for the coverage. The policy will need renewing when the term is up. Or it is no longer in effect.
Whole life insurance tends to be expensive. It is another significant difference. It’s because the premiums remain fixed. They do not increase over the term of the policy. Unless the policy has an inclusion for limited pay.
It is easy to get confused with Whole life insurance and Universal insurance.
What are the Benefits of Whole Life Insurance?
Once an individual has this insurance in place, all they have to do is keep up with the premiums. There are no concerns about it expiring. It gives people confidence in knowing that their insurance needs are no longer an issue.
Consistent premiums is another advantage. The insured knows exactly what they are going to be paying for the rest of their life. There are no concerns about an increase in the premiums. The premium price remains the same for the duration of the policy.
The amount of the policy that is paid out at time of death is guaranteed. The insured knows exactly how much money the Insurance company will have to pay. It will be the payout to the beneficiary.
Increase in value is another mitigating factor with this insurance. A specific amount of the premiums pay generates cash value. It means that the insured can borrow from this if a need arises.
How Much Cash Value Accumulates on a Whole Life Insurance Policy?
The amount of cash value that can accumulate will vary. It depends on the Insurance Companies mandate for this. It’s also determined by the amount of the policy and the premiums. It also depends on the age of the insured.
In most cases, the cash value grows more in the beginning years of the policy. As the insured ages, the growth of value tends to slow down.
It all has to do with the allocation of the premiums. One part of the premium goes for the payment of the death benefit. Another portion of it goes to the profit of the Insurance Company. Then the remainder of the policy gets applied to the cash value.
Questions to Ask When Considering Whole Life Insurance
Is There a Need for This Type of Insurance?
Most everyone reaches a stage in life where they question whether they need life insurance or not. For couples with a family, the answer is usually yes. However, there are some single individuals that may also want to consider life insurance. For example, some students have had their parents co-sign for a large number of student loans. In the event of the student’s death, the parents could end up having to pay off this debt. A life insurance policy would take care of this.
Is A Whole Life Insurance Policy The Right Choice?
With there being so many different types of life insurance, is this particular type the right one. The answer will come down to it all depends. If the purpose is to protect student debt, then it may not be the right choice. However, the single individual can still consider the cash value for the future. If the individual needs money borrowing from the policy may be an option.
Personal circumstances are going to play a big role in making the decision. The amount of long-term debt an individual has will be a big factor. It is not something that most people want to leave to others to pay for their death. There may be estate taxes that are owing. The whole life insurance payout could help with this. Then there are funeral expenses.
Over and above this individuals want to protect their partners financially. The survivor of a relationship no longer has the financial support of their partner. The whole life insurance payout can help to sustain them financially.
Is It Affordable?
One of the problems that can arise with life insurance is the cost. Whole life insurance can be much more expensive. Especially when compared to other types of life insurance. While it is important to have one must be able to afford it. If premium payments are not honored, then the insurance will probably get canceled.
How Much Insurance Should an Individual Buy?
It can be one of the biggest challenges that come with purchasing life insurance. Circumstances can change. It can be hard to predict what will happen in the future regarding the financial needs. One has to give it some thought. It is important to think about what plans are there for the future. For example, are there plans to have children, if there are none as yet. What kind of expenses is going to incur? Is there going to be purchases of assets that will create debt.? Trying to determine the answers to questions like this will help with the decision making.
Buying Whole Life Insurance from the Right Insurance Company
Finally, the decision will come down to as where to buy the whole life insurance. There are many different Insurance Companies to choose from. It can be time-consuming to contact each of them. A better approach is to get some quotes. Then comparisons among these is an option. Additional questions can be presented to the various companies. Comparing rates is a good idea. Plus, find out if there are any discounts that may lead to some savings. Also, for some, it may be wise to consider additional types of insurance.