Need Life Insurance? Consider Whole Life Insurance
Admin • February 28, 2020
If you are in the market for life insurance, then you may have come across the term whole life insurance. Whole life insurance can be very useful in certain circumstances, but it's not right for everyone. Here is more information about whole life insurance that can help you decide if this policy type is right for you.
What Is Whole Life Insurance?
Whole life insurance, or permanent life insurance, is a type of insurance that accrues a cash value and stays with you for your whole life as long as you make the premium payments. Whole life insurance policies often pay dividends, let you withdraw from your cash value, and sometimes even borrow against your policy. This type of insurance also has a death benefit for your beneficiaries.
Term life insurance differs from whole life in that term life insurance is for a limited length of time, though you can sometimes renew. This insurance type's benefits are also limited and you likely won't accrue cash value or benefits that you can use during your lifetime. Most term life policies only provide a death benefit, but they may also offer a return in premiums after the end of the term.
How Does Whole Life Insurance Work?
In some ways, whole life insurance works as an investment or bank account. In addition to a death benefit, part of your premiums goes toward a guaranteed cash value that you can use while you are alive. Tax-deferred interest is also paid on your cash value, so your investment grows.
Some policies also offer dividends when the insurance company does well, but these dividends aren't always guaranteed.
What Are the Pros and Cons of Whole Life Insurance?
Like any insurance, whole life insurance has its pros and cons depending on your personal circumstances and needs. Here are some examples of the positive and negatives of whole life policies.
The Pros
To start, your premiums stay steady throughout your life. If you obtain a low rate while you are young, then that rate will not increase as you get older. Other types of insurance often raise premiums as people age. Additionally, your returns are guaranteed and will continue to grow even when the economy takes a downturn and other investments fail or lose money.
With a whole life insurance plan, you'll also build cash value that you can borrow against or use whenever you need it. This could help you during leaner times. So whole life insurance can act as a way to force yourself to save money if you feel that you are not disciplined enough to save money on your own.
The Cons
Whole life insurance has a much higher cost than most other types of insurance. You may do better with other types of permanent life insurance that have lower rates. This is true especially if you expect your circumstances to change. If you cannot afford your premiums, then you will lose your insurance and may receive little or no benefit from your policy.
Furthermore, your cash value takes years to get to a level where it is worth as much or more than the premiums you've paid. And the actual rate of return may be less favorable compared to other types of investments. You should also keep in mind that you will likely pay fees if you withdraw, borrow money, or close your account.
For the right person, whole life insurance offers specific benefits that are helpful for when times are tough. However, you should consider it and your circumstances carefully. The staff at S.N. Anthony Insurance Inc.
can discuss different types of life insurance with you and help you decide whether whole life insurance, or another type of insurance, is right for you. Contact us for more insurance information and quotes.
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