Advantages of a Whole Life Insurance Policy
By David Chandler
To begin with, you need to understand that life falls into two very broad categories: Whole and term. The basic difference between term and whole life is this: A term policy is life coverage only.
In whole life policy, as long as one continues to pay the premiums, the policy does not expire for a lifetime. As the term applies, whole life provides coverage for the whole life or until the person reaches the age of 100. Whole life policies build up a cash value (usually beginning after the first year). With whole life, you pay a fixed premium for life instead of the increasing premiums found on renewable term life policies. In addition, whole life has a cash value feature that is guaranteed. In term and whole-life, the full premium must be paid to keep the insurance.

With level premiums and the accumulation of cash values, whole life is a good choice for long-range goals. Besides permanent lifetime protection, Whole Life features a savings element that allows you to build cash value on a tax-deferred basis. The policyholder can cancel or surrender the whole life policy at any time and receive the cash value. Some whole life policies may generate cash values greater than the guaranteed amount, depending on interest crediting rates and how the market performs. The cash values of whole life policies may be affected by a life company's future performance. Unlike whole life policies,



which have guaranteed cash values, the cash values of variable life policies are not guaranteed. You have the right to borrow against the cash value of your whole life policy on a loan basis. Supporters of whole life say the cash value of a life policy should compete well with other fixed income investments.

Unlike term life policies, whole life provides a minimum guaranteed benefit at a premium that never changes. One of the most valuable benefits of a participating whole life policy is the opportunity to earn dividends. The company based on the overall return on its investments sets earnings on a whole life policy. In addition, while the interest paid on universal life is often adjusted monthly, interest on a whole life policy is adjusted annually. Like many products, whole life has many policy options.

Make sure you can budget for whole life for the long term and do not buy whole life unless you can afford it. You should buy all the coverage you need now while you are younger, and if you cannot afford whole life insurance, at least get Term. That is why whole life policies have the highest premiums it is for your whole life, no matter when you pass on. The level premium and fixed death benefit make whole life very attractive to some. Unlike some other types of permanent insurance, with whole life insurance, you may not decrease your premium payments.
For more information about whole life insurance, visit Whole Life Insurance and Term Insurance


Here are some more insurance articles...