What is Whole Life Insurance

Whole life insurance is a type of permanent life insurance that provides a permanent death benefit to the policy holder’s beneficiaries. A whole life insurance policy can help you ensure that your family is cared for in the way you intend when you pass away. A whole life insurance policy also maintains a savings component that a policy holder can borrow against. You may borrow against the cash value that accumulates as you make premium payments. Your premiums are fixed, so you will pay the same amount from the day your policy is active until the end of your life.

Key Takeaways

If you are considering a whole life insurance policy, here are some key takeaways to help you decide.

Whole life insurance lasts for the insured’s entire life. You won’t be required to choose a specific term or worry about that term running out before the end of your life.

Your whole life insurance death benefit is paid to the predetermined beneficiaries. The death benefit is separate from the cash value of your policy. As such, the cash value may not be paid out to beneficiaries if you pass away before using it.

You can use your cash value to make premium payments but should be careful not to let your cash value go to zero. Depending on the insurance company, they could cancel your policy if that occurs.

The cash value you occur from your whole life insurance policy can earn interest at a fixed rate.

If you owe money on your loan principal, it could reduce your death benefit.

How can I increase my policy’s cash value?

You can build cash value by making more than your scheduled premium payments. This payments are sometimes referred to as paid-up additions or PUA. Any policy dividends can be reinvested into the cash value of your policy and earn interest. Over time, the dividends you receive and interest you earn can serve as a source of equity.

How can I borrow money from my whole life insurance policy?

To tap into your whole life insurance policy’s cash value, you need to request a withdrawal of funds or a loan. If you are taking out a loan, you will be charged interest. Cash withdrawn from your policy is tax-free up to the amount of total premium payments made. Any unpaid loans will be taken out of your death benefit should you pass away before paying off money borrowed from your whole life policy.

Is whole life insurance right for me?

Whole life insurance is more expensive than term life insurance. For a whole life insurance policy to make sense, you will need the necessary finances to make your higher premium payments. If you have the funds to cover a more expensive premium, a whole life insurance policy could make sense if you are looking for permanent life insurance and a way to build a savings for retirement. Whole life insurance policy’s can have guaranteed returns, which means that there is a minimum growth rate on the cash value of your policy. It can act as a more secure investment.

Are there alternatives to whole life insurance that I should consider?

The most popular alternative to whole life insurance is term life insurance. It can be 10 times less expensive and more flexible, which is why it is the more popular choice. If you were to choose term life insurance, you would choose the length of your policy, a length that makes sense for your current age and other factors. If your term ends before the end of your life, you may be able to convert your term life policy to a whole life policy or permanent life insurance depending on your insurance company. Another alternative to whole life insurance is universal life insurance, which is another permanent life insurance option.

How do I choose the right whole life insurance company?

The best way to choose the right whole life insurance company is compare quotes. Insurance Best Prices can help you find the right policy and life insurance partner. Simply submit a life insurance quote request on our website, and we’ll connect you with agents ready to provide you with a quote that meets your needs.