Whole Life Insurance
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Whole Life Insurance is the most basic form of permanent life insurance coverage. The insured person is covered for life (sometimes until age 100), and a portion of the policy is invested by the insurance company, building cash value on a tax-deferred basis over time.
With Whole Life Insurance, the premium and death benefit are determined at the start and remain the same throughout the life of the policy. The policy is guaranteed not to lapse, provided you pay your premiums. So, once you’re covered, you stay covered, even if you develop a severe health problem.
This isn’t Term Life Insurance, where premiums can increase during your lifetime. The premium and face amount of the policy are fixed for life. In most cases, Whole Life Insurance is more expensive (at least in the short run) than Term Life Insurance.
Unlike some variations of Whole Life Insurance (like Universal and Variable Life Insurance) the insurance company makes all the investment decisions, so there tends to be less flexibility in how or where the money is invested.
Whole Life Insurance is a good choice for people who want their life insurance portfolio to incorporate some savings element, and who desire stability and ease of use. It is well suited for people who don’t want to monitor their investments continually, who would rather leave those decisions up to “the experts.”
Determining the amount of coverage you need takes careful and advanced financial planning. You want to make sure you have enough coverage, but not so much as to become unaffordable. Failure to make premium payments could result in the loss of the entire investment.
Find out if a Whole Life Insurance policy allows you to borrow against it once it builds up to a certain cash value. Also find out if it ever pays dividends in addition to interest rate accrual. Some do, some don’t, but dividends are rarely, if ever, guaranteed.
Some Whole Life Insurance policies offer a limited payment option in which premiums end at age 65. Some offer an interest sensitive variation, where the cash value of the policy fluctuates according to prevailing interest rates.
If you are interested in Whole Life Insurance, but are between the ages of 50 and 75, then you may want to consider Guaranteed Whole Life Insurance. Usually, no medical exam is required and your family can enjoy the benefits of financial security.
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