What is Whole Life Insurance?
Have you thought about buying life insurance recently? You may have started determining your life insurance needs, but are now unsure of the next step. This guide can help you learn about what whole life insurance is, and if it is the right fit for you.
Whole Life Insurance
So what is a whole life insurance policy?
- Whole Life Insurance is permanent. This means that the coverage you get with whole life insurance will be in effect for as long as premiums are paid. Unlike term life insurance, which can cover you for a specific time period, a whole life policy can last a lifetime.
- You always pay the same premium. The premium you pay today is the same amount that you’ll pay in five, 10 or 30 years!
- It can provide cash for other needs. Whole life insurance policies build cash value, much like the equity in your home. As you pay your premiums, they can grow tax-deferred over time.1
- Premiums are based on age and health. This means that whole life insurance may never be cheaper than it is right now. However, in the early years of coverage, it can also mean that a term life policy has lower monthly premiums. The difference is that when your term runs out and you need to reinsure coverage later in life, those premiums will likely increase. Because you always pay the same premium with whole life, your premiums are based on the age when you purchased the policy.
Why Whole Life Insurance?
Despite the many benefits, it’s important to discuss why whole life insurance could be the right fit for you.
- Help supplement other insurance policies. If you need to add more coverage, a whole life policy can be a cost-effective addition to your plan. Because the premiums of whole life insurance are initially higher than a term policy, you may not be able to purchase the full amount of coverage that you need. Often, purchasing the amount of whole life coverage with an affordable monthly premium and an additional term life policy may provide the right combination for your coverage needs.
- Make a lasting gift to a young person. Children’s whole life insurance is often very inexpensive and you can pay the premiums for that young person, allowing the cash value to build as they age.
- Provide you with living benefits. Most people think of life insurance as a necessity to provide for others. But with whole life, your policy can be a great addition to your financial plan.
- Help cover your final expenses. Whole life insurance is often an effective way to ensure that when you die, you don’t leave your family with a large funeral expense.
Now that you know what it is, and what it’s used for, you may have decided that whole life insurance is right for you. If so, take some time to learn more about life insurance policies to determine your next steps.
1Consult with a professional tax and/or legal advisor before taking any action that may have tax or legal consequences.