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The Facts on Whole Life Insurance

Life Insurance

Whole life insurance is a permanent life insurance option. Whole life is a popular form of life insurance that offers many benefits that are not available in term life insurance policies. Before buying whole life insurance, consider these main aspects involved with this type of permanent life insurance:

Guarantees Offered by Whole Life Insurance

  • Premium guarantee. Once the policy is set up, the premium never changes. As long as you pay the premium for your entire life, the death benefit will be available to your beneficiaries. Some permanent life insurance choices include some flexibility to change the premium once the policy has been established.
  • Death benefit guarantee. There is nothing the insurance company can do to alter the death benefit once a whole life insurance policy has been issued. In some permanent insurance policies, insurers can pass along the increased cost of operations during the life of the policy.
  • Living benefit guarantee. If you decide to cancel your whole life insurance policy for any reason, the cash value portion of the policy is yours to keep. This living benefit guarantee is unlike term insurance, where it's not only possible but likely that a policyholder will pay premiums for the term of the policy. When someone outlives a term policy, the premiums paid are not returned - with the exception of specialized return of premium term policies that cost much more to purchase.

Other Benefits of Whole Life Insurance

  • Health changes don't matter. The only health considerations taken into account for a whole life insurance policy are at the inception of the policy. As your health may deteriorate over time, that has no effect on a permanent life insurance option such as whole life insurance. In contrast, someone could be healthy when they purchase a 30-year term insurance and live through the term. But at that point, they have developed a serious medical condition and that becomes a critical factor in acquiring a new insurance policy.
  • Cash value flexibility. The premium for a whole life insurance policy includes some additional money to create a cash value for the policy that is invested into a fund chosen and controlled by the insurance company. Over time, as the cash value increases, the policyholder can get a low-interest loan on the value of the policy or use the policy as collateral for a bank loan.

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