Whole Life Insurance - A Short Explanation
by: DarrylRiedl |
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Unlike term life insurance, whole life insurance policies are permanent. "Permanent" means there are no specific periods for the policy to be in effect. You purchase the policy, pay monthly premiums and have your policy for life. Term life policies require renewal at a higher cost or must be converted to a permanent policy when the term runs out.
Whole life insurance policies have the same premium rates throughout the time the policy is in force. As long as your payments are timely, the price is locked in. The money you pay in to a whole life policy builds cash value, meaning you can make money on your policy. The result is a modest dividend on your payments. Dividends on whole life policies can be taken immediately or applied to the price of your premiums to lessen the monthly cost. This money is exempt from taxes and so does not have to be counted as income.
Whole life insurance gives you the right to withdraw money from the policy while you are alive. You can borrow money against the face value of your policy. Of course, doing either of these will reduce the benefits to your beneficiaries if you do not replace the money before your death.
Unlike universal life insurance, when you purchase a whole life insurance policy you do not have a say in which investments are made, you have no control over premiums (the amount you pay in) or the face value of your policy. Your premium price will remain the same throughout your lifetime as will the face value of your account.
If you would rather not be involved with choosing investments for any reason and are fine with the original value of your whole life insurance policy, then this is the type of policy you will want to choose. You will receive modest dividends and your loved ones will be taken care upon your death with a whole life insurance policy.
About the Author
If you are thinking of buying life insurance, before making a decision I would Define Whole Life Insurance for an over view. Learn more as we define the variable life insurance http://www.wholelifeinsurance-explained.com/
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