Whole life insurance – why you should get one.
A whole life insurance is a type of cash value insurance policy that provides financial protection during your entire lifetime.
This insurance policy offers two major benefits:
1. The first one is a death benefit which is to be paid to the beneficiary of your choice in the event of your death.
2. The second benefit is the cash value accumulated over the duration of your insurance. This accumulated cash can be used as savings or even borrowed against, in the event you need money while still alive.
Whole life insurance can also be called straight life or permanent life insurance. The whole life insurance policy spans throughout your whole life not just over some time duration within your life.
Also, your benefits which are to be paid in the event of your death include both the savings and investment gotten from the premiums you paid for and the life insurance death benefits.
What is the cost of a whole life insurance policy?
Of a truth, whole life insurance policy is more expensive than your normal life insurance policy. This is because it is not just a life insurance policy but also an investment venture. Let me explain further. When you purchase a life insurance policy premium, the money you paid is divided into two. Part of it goes into your life insurance while the other part goes into the investment portion.
Also, the dividends gotten from your whole life insurance is tax-free and it leaves you a lot of wiggle room to make use of your money as you like. So you see why the whole life insurance package is more expensive. You can also even decide to use your dividends to pay for your premiums or you can decide
to cash it out.
Which whole life insurance package is the best?
It is best to note that there are three kinds of whole life insurance package, they include:
1. Traditional whole life insurance
2. Interest-sensitive whole life insurance
3. Single premium whole life insurance
The traditional whole life insurance policy guarantees you the minimum rate of return on your cash value portion. The interest sensitive whole life insurance gives you more leeway with your life insurance policy such as increasing your death benefit without raising your premiums. This is dependent on the economy and the rate of return on your cash value portion. The single premium is for someone with a lot of cash and who would like to purchase a premium upfront. This insurance package also has the same benefits as other packages particularly tax shelter returns.
What you stand to gain from a whole life insurance package
1. A part of your premium money goes toward your cash value
2. If you start early, you may grow the savings portion of your policy to the extent that you can use it to pay off your premium policy.
3. Your premium will remain constant during the time you are covered unless you choose otherwise.
4. Your whole life insurance policy gives you a lifelong coverage with no future medical exams.
5. This insurance policy also provides tax saving opportunities while you are alive and also tax savings on your estate.
Is purchasing whole life insurance policy as an investment advisable?
With all the wealth accumulated from whole life by the policyholder, whole life is not necessarily the best choice for an investment. You stand a better chance of purchasing a longer span term insurance with a fixed annual rate and then working with an investment advisor to figure out the best strategy on how to invest your money. The rate of return on a whole life insurance is very low compared to other investments, but as security goes, your money is safe with whole life insurance. Whole life insurance should not be used as an investment tool alone and in fact, your choice should be based on how well your money is protected than on the rate of return.
To understand why whole life insurance might be good for you; below are some expels to help out your decision making.
1. If you are young and do not have a means to save money on your own, you can use whole life insurance policy as a saving tool. The savings portion of your whole life insurance can be used to secure loans and mortgages in the future. This whole life insurance policy will always ensure that as a young person still finding your feet you will have a life insurance as well as little money on the side. You can also decide to pick up a better term life insurance policy in the future.
2. As a young person in good shape, if you are worried about an illness which may catch up to you when you get older or that you may have trouble getting a life insurance, the whole life is a good way to secure a policy that will last your whole life. You can also choose to supplement whole life with a lower cost term life in the future.
3. If you are rich and have more money than you can spend, then whole life insurance can be an advantageous way to secure your money with the added advantage of tax protection. You can also use whole life to protect your estate as well.
4. Whole life insurance policy is really a great choice if you are looking to leave behind some huge amount of money for some of your relatives when you are no longer around. You should also note that different insurance companies offer whole life policies at different prices. Before you purchase a whole life insurance package, shop around.
whole life insurance will provide a death benefit, cash value, and tax benefits but it will cost more than your normal term life insurance policy. Whole life insurance is also safer and it provides you with guaranteed interest on your premium package as well as death benefits. As said earlier whole life is very expensive and can even cost 5 to 10 times more than a term life insurance policy.Whole life is better when gotten as a young person. But be careful with the type of premium you go for. It is advisable to start low and then go big as your finances improve. This is because you stand a chance to lose your money if you fall behind on payments.