How does Whole Life Insurance Work?

When you are ready to purchase a life insurance policy, you want to make sure you make an informed choice on which one is right for you. Whole life insurance requires a health screening as premiums are directly affected by the individual’s age and health. Once purchased, you are covered until you die as long as you don’t miss a payment on your premium.

As time goes on, your policy will develop a cash value. A portion of your premium is set aside into a savings account of sorts, which you can borrow against. This can be useful if you find yourself needing to borrow money and don’t want to take it from your personal portfolio. Having an insurer is essential when seeking to withdraw from your policy, as you don’t want to remove from the death benefit or cause a tax problem.

The cost of a whole life policy depends on different factors, including age at the time of purchase and health conditions. You can also choose to pay your premiums monthly, quarterly, bi-yearly, or yearly. There may be additional fees if you pay your premium more than once a year. Coverage can be anywhere from a few hundred thousand dollars to multi-million dollars.

Who Needs Whole Life Insurance?

Whole life insurance is perfect for someone who wants to lock in a fixed rate for their premium and death benefits. Since it builds cash value, premiums are higher than other types of life insurance, but you can borrow against it if you need to. If you can afford the higher premiums, a whole life policy offers the best return on investment.

Term Life vs Whole Life

Although both term and whole life insurances cover an individual and provide death benefits, there are differences. You can compare and see which is right for you.

Life insurance

Everyone has asked themselves this question at least once in their life. No one wants to leave their family with the burden of figuring out how to cover their final expenses or the debt they leave behind. When choosing which life insurance is right for you, there are two types to choose from: Term and Whole Life.

Term Life Insurance

Term insurance is a form of life insurance that provides coverage for a specific amount of time, depending on the length the insured chooses. If the insured dies within their term period and has an active policy, their beneficiary will receive the total benefit amount.

Final Expense Insurance

Final expense insurance, also known as burial insurance, is a type of whole life insurance. As the name states, its focus is on covering only final expenses, and the death benefits are much lower than traditional whole life insurance plans.

Although both term and whole life insurance plans have some similarities, there are significant differences as well. Term insurance offers “terms” for how long you have your policy. Depending on your age and financial circumstances, you may only wish to obtain coverage for certain large debts like a mortgage. The premiums on term policies can go up once it is up for renewal which can cost more in the long run. There are four different types of term policies to suit the needs of each individual.

While term life coverage is generally more suited to younger people who are still carrying around large debts, whole life coverage is suited more to those looking for more predictability in the long run. Premiums are higher since they carry the additional cash value that term plans don’t have. Whole coverage lasts for a lifetime as opposed to a shorter period with term coverage.

Choosing the right life insurance plan is very important, and a good insurer will guide you in the right direction that will fit your needs. If you intend to borrow from your whole life cash value, it is vital to go through your insurer to avoid costly mistakes. They will also evaluate where you are in life and make sure your chosen plan will give you the most return on investment.

Having a life insurance plan to cover your family should the unexpected happen is essential no matter your age. With the help of your insurer, you can decide how much you want to spend, how much coverage your family will need, and what policy is best for you. Factors like age, income, debt, and health all play a part in deciding which policy to choose. Don’t risk your family’s well-being and financial security by not being prepared. Life insurance is a gift you can give them that will live on once you’re gone.

Everyone has asked themselves this question at least once in their life. No one wants to leave their family with the burden of figuring out how to cover their final expenses or the debt they leave behind. When choosing which life insurance is right for you, there are two types to choose from: Term and Whole Life.

Term Life Insurance

Term insurance is a form of life insurance that provides coverage for a specific amount of time, depending on the length the insured chooses. If the insured dies within their term period and has an active policy, their beneficiary will receive the total benefit amount.

Final Expense Insurance

Final expense insurance, also known as burial insurance, is a type of whole life insurance. As the name states, its focus is on covering only final expenses, and the death benefits are much lower than traditional whole life insurance plans.