Learn About Whole Life Insurance
There are many types of life insurance, each with its own benefits and drawbacks. But where do you start when it's time to buy? Let's take a look at whole life insurance so that you can see if it might be the right fit for your needs.
Whole life insurance is an investment policy combined with a type of permanent life insurance protection. Whole life typically offers coverage for the insured's entire lifetime, and provides more than just basic death benefits; these policies may offer tax-deferred growth, cash accumulation and automatic premium payments. One notable difference between whole life and term policies is that whole life builds up a cash value (cash surrender value) while term does not, but also term lasts much shorter (e.g. 10 years for term, 20 for whole life).
Whole life insurance is considered a conservative investment because your premiums and remaining benefits are paid off in a lump sum payment once you die. The death benefit received from the policy’s corpus (cash value) goes directly to the beneficiary you named in the policy, meaning that it is paid tax-free when distributed. If the policy owner survives longer than one year after their first premium payment, no further premium payments are due and they receive a cash refund of any unused premiums.
Whole life insurance can be used as a family income replacement plan and help financially support an individual's spouse, children, grandchildren, charities and other beneficiaries for the duration of their lifetime. Another advantage of whole life is its tax-deferred growth which means that the cash value in the policy does not face federal, state and/or local income taxes. In addition to this, whole life insurance offers guaranteed level premiums and attractive cash value growth rates.
The primary disadvantage to whole life policies is that they typically have higher premiums than term policies do, and also their premiums increase with age just like an individual’s health care costs do.
Whole life insurance is the most complex life insurance available. If you are looking for a lifelong savings vehicle, there are many types of alternative investments that come with less risk and more flexibility than whole life.
If you're interested in getting a whole life policy, make sure you read your policy and understand how it works before making any premium payments. Whole Life Insurance is an investment product--not a savings or retirement plan--and should be treated differently. To learn more about your policy, talk to your insurance professional. [END]
I thought this was decent information and I have personally seen similar references to this on other forums - just not as succinct so I wanted to post this up here...
Posted by The-Omen at Wednesday, April 1, 2013 (10:36:30) (1679 reads)
Wikipedia says the following about "whole life insurance":
Whole life insurance is an investment policy combined with a type of permanent life insurance protection. Whole life typically offers coverage for the insured's entire lifetime, and provides more than just basic death benefits; these policies may offer tax-deferred growth, cash accumulation and automatic premium payments. One notable difference between whole life and term policies is that whole life builds up a cash value (cash surrender value) while term does not, but also term lasts much shorter (e.g. 10 years for term, 20 for whole life).
Whole life insurance is considered a conservative investment because your premiums and remaining benefits are paid off in a lump sum payment once you die. The death benefit received from the policy’s corpus (cash value) goes directly to the beneficiary you named in the policy, meaning that it is paid tax-free when distributed. If the policy owner survives longer than one year after their first premium payment, no further premium payments are due and they receive a cash refund of any unused premiums.
Whole life insurance can be used as a family income replacement plan and help financially support an individual's spouse, children, grandchildren, charities and other beneficiaries for the duration of their lifetime. Another advantage of whole life is its tax-deferred growth which means that the cash value in the policy does not face federal, state and/or local income taxes. In addition to this, whole life insurance offers guaranteed level premiums and attractive cash value growth rates.
The primary disadvantage to whole life policies is that they typically have higher premiums than term policies do, and also their premiums increase with age just like an individual’s health care costs do.
Whole life insurance is the most complex life insurance available. If you are looking for a lifelong savings vehicle, there are many types of alternative investments that come with less risk and more flexibility than whole life.
If you're interested in getting a whole life policy, make sure you read your policy and understand how it works before making any premium payments. Whole Life Insurance is an investment product--not a savings or retirement plan--and should be treated differently. To learn more about your policy, talk to your insurance professional. [END]
I thought this was decent information and I have personally seen similar references to this on other forums - just not as succinct so I wanted to post this up here...
I just got my email informing me that I can start my first payment on January 3rd. I am excited, but also somewhat skeptical about doing this as it is very new to me and I have been having second thoughts lately...
Whole life insurance is an investment product, not a savings vehicle, meaning that your payout will be paid at your death. The details you should know are described below:
You can get a whole life policy from any company authorized to write coverage in the state where you live. This is determined by the state insurance commissioner or license department.
There are several types of whole life policies - the most common being a single premium term policy, which is illustrated in the above image.
You can take out a term life insurance policy and convert it to whole life when you die. You can do this only if the year in which you turn 70 falls within your insured period ("term period" on your policy).
Whole life premiums are higher than those for term coverage because they are more advantageous - they provide benefits that will grow tax-deferred while you're alive, in addition to a death benefit payable on your death to the named beneficiary.
It's important to understand that whole life insurance is a progressive investment with a guaranteed income stream. It's an insurance policy with the tax advantages of investing in tax-deferred growth. However, it's still an investment and like other investments, there are various types of policies available.
That said, comparing the two: term life insurance is designed to provide you with long-term financial protection against the risk of losing your entire savings when you die.
A whole life policy is designed for those who want to protect their savings in more ways than one. It provides a guaranteed income stream for life, combined with tax-deferred growth and a death benefit payable on your death to the named beneficiary.
Conclusion: Whole life insurance is considered a conservative investment because your premiums and remaining benefits are paid off in a lump sum payment once you die. The death benefit received from the policy’s corpus (cash value) goes directly to the beneficiary you named in the policy, meaning that it is paid tax-free when distributed.
I hope this helps... good luck!
After reading many of the posts on this site I feel a little more secure in my choice to go for whole life. Many say not to use it as an investment vehicle but rather as protection for myself and family which is what I feel I need right now.