Understand whole life insurance options like an insurance agent
Life insurance comes in two flavors: term and permanent. Term life offers a death benefit for a specific period of time while permanent life insurance guarantees coverage for as long as you live, assuming premiums payments are made. Of all the variations of permanent life insurance, whole life is one of the most popular.
Sometimes called ordinary life insurance, whole life features a savings component that builds cash value throughout the duration of the policy. Although expert opinion is mixed on whether it is wise to use whole life insurance as an investment, many individuals appreciate the reliable returns provided by their plan.
How whole life insurance rates are calculated
Those looking for cheap life insurance may be tempted to bypass whole life plans. Premiums for permanent life insurance can be much higher than those for term life policies with a comparable death benefit. That is because a portion of your premium dollars are being invested to grow the policy's cash value.
Once the cash value has been established, policyholders can withdraw money from the account to pay for expenses such as buying a house or paying for college. In addition, should you decide to discontinue your life insurance coverage, you can surrender your policy and receive a payout of the cash value.
Who should buy whole life insurance
Whole life insurance is one of several permanent life insurance options available on the market today. It is often the best choice for those who like predictability. Unlike other permanent life insurance plans such as variable universal life which carries an investment risk, traditional whole life insurance plans guarantee your death benefit as well as the rate of return on your investment.
The Life and Health Insurance Foundation for Education (LIFE) also suggests that permanent options such as whole life insurance may be appropriate for the following four reasons:
- Lifelong life insurance protection: Buying a whole life insurance policy guarantees that you will always have coverage so long as you make your premium payments. Term life, on the other hand, must be renewed. If you become ill, you may find that the life insurance company declines to extend your term policy.
- Future plans include major expenses: Whether you are planning to start a business or send your children to college, many use whole life insurance as an investment to build up tax-deferred savings. The cash value savings can then be withdrawn for any purpose.
- Funds to pay final expenses and estate taxes: When calculating the amount of coverage needed with a whole life insurance plan, don't forget to consider burial costs and any taxes that may be assessed on your estate.
- Security for retirement: Although some argue that life insurance is only necessary while you are young and have children at home, the benefits of this financial product can last far into the golden years. Without benefits from a life insurance policy, many surviving spouses find themselves unable to maintain their lifestyle into retirement should their husband or wife pass away.
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