Whole Life Insurance Basics


There are many pointers that you need to be aware of when choosing to buy a permanent life insurance policy. For one, permanent life insurance comes in many shapes and sizes. They cater to the dynamic and every changing needs of consumers. In order for you to land a permanent life insurance that’s perfect for both your preferences and requirements, here is a quick rundown of how whole life insurance works, and pointers on how to buy one from life insurance providers.

Unlike term life insurance which can only guarantee protection for a predetermined period of time and can only assure death benefit between 10 to 30 years, a permanent life insurance policy can give you higher level protection by ensuring death benefits until the time of your untimely demise.

The limitation of term life insurance is perfectly exemplified on this situation:

If you purchased a term life insurance product with your spouse being the beneficiary of a $100,000 coverage under a policy that runs until 2020, your loved one is guaranteed of this benefit if you pass on before 2020- the term’s policy date. However, if you die after 2020, or at the least a day after your life insurance expires, your spouse will not receive any pay out. This flaw makes term life insurance not the best option when shopping life insurance. But of course, there are groups of people who will find term useful, such as those that have short-term insurance needs or those who have other sources of funding under their name.

Whole life insurance on the other hand guarantees to cover you for your entire life regardless of whether you live past the age of 100 or more. There are of other attractive benefits to opting for permanent life insurance products:

Whole life insurance products are also perceived as wise investment tools too. Usually, a predetermined percentage of your premium payments go straight into a cash value account that is a on a tax-deferred setting. The cash value element essentially makes all permanent life insurance policies make them more expensive and complicated than your standard life insurance policy.

  • Whole Life Insurance

With a whole life insurance policy, your loved are guaranteed of death benefits. You are required to pay a fixed amount of premium throughout your lifetime- one that is more expensive than premiums compared alongside those of other permanent life insurance products. In addition to death beenfits, policy holders are provided with guaranteed rate of return on cash value.

The fundamental rationale as to why permanent life insurance policies are more costly is that your premium payments will not increase as you age. Surveys reveal that your chances of passing on while you’re healthy and young are low, but will increase as you grow older. The rate on the premium payments are calculated as if you are already at your prime. This makes it profitable for insurance providers to guarantee death benefit after your death and provide cash value when needed as well.

The premium payments under permanent life insurance are more expensive than other types of life insurance products when you obtain it at a younger age. After your broker receives a small percentage of commission, a chunk of your payments then go conservative, fixed-income investments which in turn enable life insurance companies to generate guaranteed cash value for policy holders.