What is whole life insurance? Whole life insurance is actually a life insurance policy with a savings component built into it that can last for your entire life. One type of life insurance can be used as...
One type of life insurance can be used as a financial tool in addition to protecting your loved ones in the event of your death. This type of life insurance is known as "whole life insurance." Whole life insurance is actually a life insurance policy with a savings component built into it that can last for your entire life. Joe Sostarich, a 26-year veteran of life insurance sales and management says, "Whole life insurance is a policy which builds cash value over time. The cash value that is built up with the payment of your premiums can be made available to you in the future." Some people use whole life insurance as a way to save money for their retirement while protecting their loved ones at the same time. Whole life insurance, like term life insurance, will pay off a certain amount of money to your beneficiary upon your death.
Whole life insurance policies are usually kept for an insured's entire lifetime. These policies are longer because you want to build up your cash value in the policy. Because of the additional savings component the premiums for whole life insurance are higher than the premiums for term life insurance. Whole life insurance policies may pay a fixed rate of interest or may invest your money in the form of money markets, mutual funds, or bonds. You never need to worry about having to renew your policy or pay a higher premium at any time as the premiums will be fixed for the life of the policy.
Whole life insurance policies are like savings accounts that you can borrow against in the event of financial need at some point in the future. You can take loans against the cash value in your insurance policy or you can use the cash value in other ways. Joe says, "You can use the cash value in your policy to pay the premiums in the future as a way to keep a life insurance policy going without having to pay for it out of your current income." Whole life insurance policies can also be set up to pay an annuity. Annuities are regular payments that can supplement your income during a specified period of time. Annuities are very useful to people in their retirement, as they will be receiving a fixed amount of money that they can depend on in addition to social security. People who don't have any other types of retirement savings can benefit by setting up a whole life insurance policy to provide more financial security in their golden years.
The cash value that you build in a whole life insurance policy is tax-sheltered income. This means that you will not have to pay taxes on this money until you withdraw it for use. A whole life insurance policy is a great way to save your money tax-free because it is serving a dual purpose by providing you with insurance as well. Whole life policies also make it possible for you to have affordable insurance when you are older and regular term policies are too expensive.
Whole life insurance policies require the same initial types of physical examinations and health histories that term life insurance policies require. The healthier you are, the lower your premiums will be.
