Insurance World

If you have decided that whole life insurance is the route you want to take, you need to be well-aware of both its pros and its cons.

Whole life insurance covers you for your entire life, as opposed to term life insurance which only covers you for a certain number of years. However, with that additional coverage comes additional costs. Isn’t that the way things always happen? With whole life insurance, not only are you paying for the cost of the insurance, but you are also paying for the cost of investment. Some have referred to the investment costs as “forced savings,” and, admittedly, there are ways of saving for retirement that make more sense to some. As you get older, the cost of insurance coverage gets higher and the cost of investment gets lower. If you decide to cash in your whole life insurance policy, you may be paid in cash or in insurance that has been paid-up. Yet, with commission fees, market fluctuations, and hypothetical numbers that agents use for illustration purposes, it is not so easy to know how much you will cash in.

Still, there are many wealthy people who opt to purchase whole life insurance policies, and for a good reason. Whole life insurance policies help them in estate planning. By setting up an insurance trust through whole life insurance, they can make sure the proceeds of their insurance policy are used to pay their estate taxes. This is helpful, as estate taxes would otherwise be left to be paid out-of-pocket.

After understanding whole life insurance, it might not seem as safe and secure as its name sounds. Yes, you will be covered for life, but there are also additional costs for coverage that some people just do not need. If you have the extra money to invest in whole life insurance, by setting up an insurance trust, you won’t exactly be wasting money, either.

Life insurance offers every consumer a way to take care of loved ones for years to come, even if he or she won’t be around to put food on the table. The basic idea of life insurance is that during an insured person’s lifetime, he or she makes monthly payments to an insurance company. When the insured person passes away, the beneficiaries of his or her policy, usually immediate family members, make a claim and the insurance company writes them a check for the value of the policy. In many cases, the amount the beneficiaries receive is higher than the amount of money the customer put into the policy.

There are two basic kinds of life insurance. The first, called term life insurance, is bought for a discrete period of time at a fixed premium. It includes nothing above or beyond a basic death benefit. This is an increasingly popular form of life insurance. The second kind of policy, known as a whole life insurance policy, is a bit more complicated. A customer contributes to his or her whole life insurance policy on a monthly basis for the duration of his or her life. The premiums fluctuate over time, and tend to follow a gentle upward curve as the customer ages. In addition to including a basic death benefit, whole life insurance includes an investment component that is meant to help the customer grow his or her wealth. This makes whole life insurance substantially more expensive than term life insurance, but many people argue the increased fees are worth it because you get more for your money.

How much life insurance you need has quite a bit to do with how much you can afford to spend on a life insurance premium each month; but it has equally as much to do with how much coverage your family’s lifestyle and situation requires you to have. It is a good idea to try to provide your beneficiaries with a policy that will offer them enough to cover your funeral expenses and to continue to meet their living expenses for as long as possible without facing financial hardships. There are multiple worksheets available online that can help you make an educated estimate as to how much coverage you should aim for, but it is crucial that you discuss your situation with an experienced and trustworthy professional before you make any firm decisions about what kind of life insurance policy to purchase.