Whole Life Insurance is a permanent life insurance protection for your entire life. It is like buying a house or condo, and the property is yours, as long as you pay your mortgage payment, or after it is fully paid off. Coverage with level premiums and a guaranteed death benefit, whole life insurance is a perfect plan for people who think long term and don’t like an increase in premiums. Whole life Insurance is a good choice if you want a life time protection at a fixed premium and can comfortably afford to pay, whole life is also good for your estate or retirement plan.
Unlike term life insurance whose premiums eventually rise after the initial guarantee period, Whole Life Insurance premiums will not increase during your lifetime. And as long as you pay the premiums, the coverage stays in effect, no matter your age or health conditions. In a whole life insurance plan, a portion of your premium will be growing as a tax-deferred saving which is called cash value. Although in the beginning you won’t have any cash value, over time your policy will accumulate a cash value that you can use during your life time by way of loan.
You can also purchase the whole life insurance in a predefined number of payments say for 10, 15 or 20 years. Depending on the plan you buy, whole life insurance spreads the cost of insurance either over the lifetime of the policy, or over a limited period of time predefined by you. Payments will stop at the end of the payment period selected, but the coverage will continue for life. If you choose a predefined payment plan, you are choosing an insurance product that is completely paid for after a number of years. Let’s say you are 40 and you have purchased the 20 Pay Option, you will pay your guaranteed premium until you are 60, and you will still have the insurance coverage for life, you just don’t have to pay for it any more after 60 years of age.
The cash value of the life insurance can be used for retirement income as well, that is, if you die - cash for your family, and if you live to retirement - tax free money for you to enjoy. Sound interesting. doesn ’t it?
PROS of Whole Life Insurance
- Predictable, fixed premium
- Permanent insurance protection
- Cash value accumulation
- Retirement income
- Policy loan for emergency
CONS of Whole Life Insurance
- Complex and no flexibility
- Difficult to purchase enough coverage due to higher premium
- Surrendering for cash value taxable
- Costly if coverage lapsed early