Whole life insurance as the term suggests is an insurance policy which extends over the entire lifetime of the person concerned. The premium remains constant over the period of the policy which is one of the biggest advantages. In other words, one doesnít have to worry about the rising prices, especially when there is a chance of premium going up without an actual increase in the income of the individual. Whole life insurance pros and cons can be weighed based on whether a person aims to have a constant premium for a definite death benefit for his or her family.
Whole life insurance offers lifelong cover to the beneficiaries without an actual increase in the premium. The complete protection offered by whole life insurance ensures that the family of a person receives a lump sum amount upon the death of the individual. This lump sum amount is referred to as the face value of the insurance and is paid out to beneficiaries as the death benefit. One of the biggest pros of whole life insurance investment is the fact that the cash value comprises of returns on the premiums paid. The insurance provider actually shares part of the profit on the premiums by giving dividends in some cases. Interestingly, no tax is charged on these returns primarily because these returns are considered equivalent to premiums that have been charged in excess by the insurance provider.
Whole life insurance policies use a part of the premium money for the cash value which gets accumulated and after a few years can be used to pay off the rest of the due amount. So, one has lifelong protection without any cost. With whole life insurance policies you donít need to undergo future medical exams, which is an important prerequisite for purchasing health insurance in the future. In fact, insurance gets more expensive as your age increases and if medical exams show any health issues. Whole life insurance frees you of that anxiety. You can apply online or request for free whole life insurance quotes to get an idea of the annual premiums that you might need to pay for a specific death benefit. The good thing is that the individual gets a guarantee that the cash value is enhanced irrespective of market conditions or the performance of the company. So a good return is due. The tax benefits and insurance protection for the whole life is an added bonus that negates the fact that the returns are low compared to other financial instruments.
There are several types of whole life insurance such as interest sensitive policies, participating and non participating policies and single premium policies. Each of these has their own advantage. Although whole life insurance rates are lower compared to other investments, these policies guarantee death benefit and one also receives interest over accumulating cash value. In policies like the single premium type, the individual can make a large upfront payment if he or she has sufficient money. The interest sensitive policies have a varying rate of interest on the cash value accumulated and this rate of interest depends on the market conditions.
Whole life insurance can also be of limited pay, where the policy is designed in such a way that the entire premium amount due can be paid off in a stipulated number of years. Similarly, the policy could be designed so as to stop premium payment when the individual reaches a particular age. The cash value of the whole life insurance is considered liquid enough, which allows individuals to use the policy as collateral and apply for a loan.