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.

Insurance is meant to protect you. But scams out there can make buying insurance dangerous. These schemes can cost you hundreds or even thousands of dollars, and leave you and your family without vital insurance protection. Here’s what to watch out for:

Scams

• Steal your premiums-An agent takes your premium check but doesn’t buy you the promised insurance. Instead, the agent steals your money. You aren’t protected, and may not know this until you make a claim.

• Sliding-An agent secretly slips extra features into your policy (such as motor club membership, legal defense coverage, accidental death coverage, guaranteed renewable life, towing coverage). Hidden “extras” that may be worthless can add up to $200 or more to your premium.

• Churning-You’re conned into dropping a perfectly good life insurance policy and buying an expensive one you don’t need. Example: Cashing out your valuable whole life policy to buy a “better” one. You lose years of built-up cash value and have to start all over again. Seniors, especially, should watch out.

• Fake insurance-You’re sold fake insurance (often from a company that isn’t licensed or doesn’t even exist) such as auto coverage, or health insurance for your business.

Fortunately, you can protect yourself. The Coalition Against Insurance Fraud offers these money-saving tips:

• Call your state insurance department and make sure both agent and insurer are licensed.

• Normally, you should make your premium check out to the insurance company, instead of the agent. Call the insurance company within 60 days to confirm you’re covered.

• Read all insurance documents thoroughly before you buy. Insist that the policy is clearly explained point by point, in plain English. Also have a trusted relative or financial expert review. Demand a point-by-point comparison with your current policy. Do you need this new policy? Is it better than your current one?

• Go slow if the price of coverage seems too low to be true.

• Back off if you get vague answers to your questions, or you’re pressured to “sign up now because this special deal expires today.”

• Never sign a blank insurance form, and get copies of all forms.

• Be wary of door-to-door salespeople or e-mail pitches.