A whole life insurance explanation. This should be required reading for anyone about to purchase life insurance.
Whole life, in my humble opinion, has in recent years got a bad rap. People tend to buy term life insurance because it is cheaper.
Although I believe that a good term insurance policy can take care of the insurance needs of most people…a good whole life insurance policy is worth looking at. Here is your whole life insurance explanation.
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- Guaranteed Death Benefit
The death benefit of a whole life insurance policy is guaranteed to stay level for the duration. If you think about it, that means a lifetime. That type of guarantee cannot be sneezed at.
The premiums of your whole life insurance policy is also guaranteed never to increase. This is also a very important feature. The policy can never be canceled by the insurance company.
- Cash Value Accumulation
If we are going to look at a whole life insurance explanation we must examine cash values. A whole life insurance policy has what is commonly referred to as cash values.
That is cash available to you if you should need it…at any time. You can surrender your policy and get the cash that the policy has accumulated, or you can take the cash in the form of a loan and still keep your policy in force.
The cash value of your policy accumulates tax-deferred, which means that while the cash is accumulating interest you pay no taxes on the interest. Whenever you take out the cash you pay the taxes then. You also borrow on a tax free basis.
In our whole life insurance explanation we must also find out how dividends work. As most whole life insurance policies are participating policies you earn dividends on your policy. Each year the life insurance company declares a dividend…a portion of which goes to policy owners who own a whole life policy.
Dividends are not guaranteed. You can take your dividend in cash. The company will send you a check each year. You can leave the dividend to accumulate interest, you can use the dividend to reduce your premium outlay, or you can elect to purchase paid up additions with your dividends.
Paid up additions are single premium policies of the same type…that is whole life insurance. These paid up additions also have cash values and accumulate dividends.
- Waiver Of Premium Disability Rider
You can add a waiver of premium rider to your policy, which states in a nutshell, that if you should become disabled anytime after six months of disability the life insurance company will pay the premiums for you. It does not matter how long you are disabled. They will pay the premiums even if it is for the rest of your life.
- Accidental Death Benefit
To your whole life policy, you can add an accidental death benefit rider which states that if you should die in an accident the insurance company will pay your beneficiary twice the amount of life insurance you applied for.
As you can see from my whole life insurance explanation the benefits of the the whole life insurance policy are many.