Insurance World

Whole life insurance, also known as “cash-value” insurance is a basic and consistent type of permanent life insurance which remains in effect your entire life at a level premium. This life insurance is a good choice got you if you do not expect your life insurance needs to diminish over time. A portion of your premium goes into a reserve fund called ‘cash value’ that builds up over the years your policy is in affect. Your reserve fund is tax-deferred and you can borrow against it, until you withdraw it.

The premiums must generally remain constant over the life of the policy and must be paid periodically according to the amount indicated in the policy. You may also have the option of a single premium —– paying all of the premiums at once with a single lump sum. Your cash values will grow to equal the amount of the death benefit when you turn to age 100.

Although, whole life insurance is very expensive, and if you’re on a limited budget, you may not be able to afford all the insurance coverage you actually need. But the plus point is that the death benefit is guaranteed as long as premiums are met. Also death benefit will never decrease if you don’t borrow against it.

Whole life insurance policy’s returns will fluctuate with the markets and will usually follow returns available from other investments like equity mutual funds. However, if you decide to quit your policy, your cash value can be paid in cash or paid-up insurance.

Whole life insurance is most suitable for you, if you want to:

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use it as a tax and estate planning vehicle,
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accumulate cash value for a child’s education or retirement,
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pay final expenses,
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provide money for a favorite charity,
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fund a business buy/sell agreement,
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provide key person protection.

Before buying the whole life insurance, you need to think carefully about choosing your level of coverage. Too often people make the mistake of insufficiently covering or even worse, financially overextending themselves. This would be a tragic error with whole life insurance policy because defaulting on premium payments can mean policy cancellation and the loss of your entire investment. So be careful and make sure you:

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pick a life insurance policy that has a guaranteed cash value starting at the very first year,
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choose the one with the highest cash value in the very first year,
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consider “participating” insurance policies which can pay dividends, increasing your policy’s value by boosting both the total cash value and the death benefits,
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beware of any insurance policy that levies “surrender charges” when you cancel.
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if you ever need to stop paying premiums, your policy lets you use the accumulated cash value of the life insurance policy to pay the premiums, thus keeping your coverage current.

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Life insurance is one of the most important purchases a person can make. Not only can life insurance help your dependents – beneficiaries – in the event of your death, but it can help you and your dependents while you’re still alive. For example, if you find yourself in financial stress, you might be able to cash in your life insurance policy, depending on the kind of life insurance policy you have and the company from which you’ve purchased the policy.

Most people’s education on life insurance goes something like this: you buy a policy and your family members will get some money when you die. This is a haphazard way of looking at life insurance. No one should ever blindly purchase life insurance. Everyone should first evaluate their financial needs, and the needs of their beneficiaries, before deciding the amount and type of life insurance to purchase.

When you start thinking about purchasing a life insurance policy, you should first look at your assets. Are you wealthy enough to help with the bills you leave behind? If you are, you might not need a large life insurance policy. The money you leave behind may be enough to cover funeral and burial expenses as well as other bills such as estate taxes. Do you have enough money to cover lost income should you become unable to work? If you don’t have enough to act as a supplemental income, you may want to purchase a larger life insurance policy.

Then, take a look at your beneficiaries. How many do you have? Do you have a spouse? How many children? Are you supporting an aging relative? The answers to these questions will help you ultimately decide how much life insurance to purchase, because regardless of how wealthy you are, or how much money you have saved, if you have several dependents, or just one or two elderly dependents, every penny helps once you’re gone.