Many people don't find whole-life insurance to be a good choice because of the high cost and low returns. Some people find it more beneficial to have a whole policy than a term policy. You can choose a whole policy that will last your entire life. It also earns interest through cash value, guaranteed rate of return on cash, and tax-deferred investment option. This is ideal for those who have exhausted all other retirement accounts.
While term life insurance is generally more affordable than whole life, it's still a good option for people who have high net worth or long financial responsibilities.
A whole life insurance policy can be used to provide financial support for your loved ones and charitable organizations.
Many whole life insurance policies can be considered "participating", which means that you could earn dividends based the company's financial performance. Your dividends can be used for a variety of purposes, including increasing your policy's cash value.
Although whole life is more complicated that term life, it's still simpler than other permanent types of life insurance. The premiums do not change over time, and the cash balance account grows at a fixed pace. Except for loans with large cash values, the death benefit cannot be reduced. Your policy does not require you to repay loans, however your insurer will subtract any outstanding debts from the final benefit to your beneficiaries.
To help you better understand the difference between whole life and term life, here's a brief overview on each type of coverage.
Whole life insurance costs more than term and is the most widely used type of permanent lifestyle insurance. The reason is that most policies offer lifetime coverage and payouts regardless how you die. There is also a cash value component to whole life insurance. A portion of your premiums goes into the account. This account grows over time. Once enough cash is built up, you are able to borrow against it or surrender the policy.
The best whole-life rates will depend on your age and health.
If you're just starting a career with a high potential earning future, purchasing your entire life as a young person will cost less and lock you in at a lower rate.
The term of your term life insurance should correspond to the financial obligation it covers. A 20-year policy might be appropriate for a parent who is a new parent. This will cover you until the child no longer depends on you financially. The best life insurance companies all offer term life. You can easily compare quotes and get life insurance online.
If you wish to leave a financial legacy, a whole-life policy can help provide for your family and favorite charity organization.
You have many options when choosing the right life policy to protect your family. Whole life insurance lasts for many years and offers a cash savings feature. Policies are up to 150% more expensive than term-life insurance which is limited in time and has no cash value.
If the idea that you can earn cash value or potential dividends appeals, then this should not be your only reason for choosing your life.
