It’s called whole life insurance because, as long as you keep current on your premiums, it covers you for your whole life. Contrast that to term life insurance, which only provides coverage for the period (or term) specified in your policy. Both whole life and term life have a face value that’s paid to your beneficiary in the event of your life subject to the limitations and exclusions of your specific policy. But whole life builds cash value on a tax-deferred basis as the years go on – one of its most attractive features. On the other hand, whole life tends to be more expensive during the first few years of coverage, which may not make it the best choice for a young family on a budget.
Do You Really Need Whole Life Insurance Coverage?
Deciding whether or not whole life insurance is right for you will also help you determine how much you need when looking for whole life insurance quotes.
1. Do you own a business?
A whole life insurance policy can provide your family with cash to keep it operating after you die. If you’re in a partnership, and your partner dies, a whole life policy can help you buy out your partner’s family – very useful if you can’t stand your partner’s relatives.
2. Do you have a favorite charity or cause?
You can name it as your beneficiary on your policy. There may be some income tax or estate tax advantages here, too, depending on who actually owns your whole life policy. Consult with your tax preparer or attorney for details.
3. Do you have a child with special needs that will make him or her dependent on you for life?
Your whole life policy can assure your child will be cared for after your death.
4. Do you have a family health problem?
Typically, whole life insurance policies will let you increase your coverage without the need for tests.
To determine how much whole life insurance you need, figure out what you own (assets) and what you owe (debts). Based on your annual budget, determine which spouse is responsible for which expenses and obligations. How much of those would your death leave your surviving spouse to shoulder and for how many years? The answers should give you a rough idea of how much coverage you need when you go looking for whole life insurance quotes.