Getting a whole life insurance policy is providing yourself with lifetime protection.
You see, when you are ready to purchase a life insurance plan, you must first identify your needs and what you wish to gain from the coverage.
Just like purchasing a term life insurance, you should already know that it has a limited duration and a return of premium attached to it.
So, people going for it may majorly want to save money from it. However, this is not so with the whole life insurance and its policy.
A whole life insurance coverage comes with specific regulations and policies but it only becomes beneficial to you if your plans match the perks.
That said, if you are planning to purchase life insurance coverage, check out what whole life insurance holds for you and decide if you want it. Then, shop around and get a good quote from an insurance company.
What is whole life insurance?
Whole life insurance is the traditional life insurance plan. It is the kind of coverage that goes all the way to a lifetime.
This means that there is no limited duration to the coverage. Also, this whole life insurance has a cash value option attached to it.
Moreover, it is another type of savings that you can borrow against in case you need emergency funds. Depending on your policy, you can withdraw from your cash value if you let it build up well enough and this comes tax-free.
Whole life insurance provides your beneficiaries with accumulated benefits when you pass away. That is if you keep paying your premiums regularly.
But in cases where you do not pay back your loans, if your cash value is reduced a lot due to withdrawing or borrowing, it will affect your beneficiaries’ payout.
Difference between a whole life insurance and term life insurance
There are clear-cut differences between these life insurance policies.
Though, it seems that one is more advantaged than the other but when it comes to meeting the needs of people, either of them delivers to the fullest.
Term life insurance lasts between 10 to 30 years and expires or the policy stops. A longer plan with the term life insurance depends on whether you wish to renew it.
The beneficiary benefits that come with it depend on how you handle your policy and pay your premiums.
More so, some policy providers allow their term life policyholders to convert their term life insurance policy to a whole life insurance policy.
Also, if you discuss well with your policy provider, you could get the return of the premium at the end of your policy.
On the contrary, whole life insurance lasts for a lifetime and builds cash value for you in the process.
More on whole life insurance
Your insurer can provide you with the variable whole life insurance policy.
It is called the variable whole life because the premiums are either in a fixed state or a variable state. So, your premium goes for the exact amount you need to cover some expenses like mortgage.
Over time, when your premium builds more cash value on the coverage, the amount of premiums you need to keep paying to maintain those expenses will reduce.
Furthermore, your whole life coverage can become modified and stop being the traditional kind. When this happens, you will expect a rise in premium after five years or thereabout.
However, after that premium increment, it stays constant going forward.
What is the cost of whole life insurance?
The cost of whole life coverage depends on many factors. First, the insurance companies have different policies and premiums specific to plans.
The same reason why you must shop for quotes from different insurance companies until you get what suits your pocket and your needs.
Again, the cost of this coverage depends largely on age and health history. People who have come of age and with medical history will be charged more premium than younger healthy people.
Another determinant of this coverage cost is the occupation of the prospective policyholder. A risky job that puts you in harm’s way or increases the risk of a health challenge may add to the cost of your premium.
Advantages of whole life coverage
The best clause of this policy is the permanent coverage it comes with. It does not have a termination date and no need for renewal.
Again, it can earn you dividends if your insurance company has the option. Through investments, your policy may begin to offer you dividends.
It builds up cash value. Your coverage does not only take care of your beneficiaries, it builds cash value you could borrow against or withdraw in serious money needs.
Except you want your whole life coverage to be modified, you will have a steady premium all through with the traditional whole life coverage.
Finally, the benefits payouts to your beneficiaries will go tax-free if you pass away.
Disadvantages of whole life coverage
While whole life is regarded as straight or traditional life insurance, it still has some disadvantages.
Cash value duration is not fast. It takes time to build up a decent cash value. The cash value option on this type of coverage is a very encouraging idea.
However, building up this cash value takes a lot of time, constant premium payment, and patience to build it up.
A cash value loan has an interest attached to it. So, while it is nice to have a fallback during money emergencies, know that each loan you take out has an interest to it.
It is expensive. As opposed to term life insurance which is mostly very cheap. The whole coverage has more expensive premiums. Also, your health history may increase your premiums.
It is not flexible. Most times, the coverage is just rigid and has no room for flexibility like other health life insurance policies.
The traditional life coverage, also known as the whole life coverage saves you a lot and offers you peace of mind.
There may be other kinds of life insurance out there but whole life makes more sense if you think about the future a lot.