Whole Life Insurance
Understanding Whole Life Insurance
Purchasing life insurance is an important decision and deciding between a whole, term, or universal plan can be tough for a first-time buyer. Whole life insurance is one option available to consumers and offers a cash value component. Two of the biggest benefits of this type of plan include a guaranteed death benefit and cash value that increases over time that can be borrowed against for money.
One of the biggest differences between whole life plans and policies like term life insurance is that it protects the owner for life. The monthly premiums that are paid are put towards savings, investments, and death benefits. This in turn helps to fund any money that would be pulled out against the policy. Premiums also remain consistent throughout the life of the plan. It is important to keep in mind that since whole life plans have additional savings components, they tend to be a little more expensive. Some plans can be five times costlier than a simple term policy would be.
Types of Whole Life Plans
Whole life plans give policyholders the flexibility they need to stay protected while remaining within budget. Below are three different types of plans to consider when choosing a whole life policy:
- Traditional Whole Life Insurance – A policy that provides a guaranteed minimum rate of return for the cash value portion of the plan.
- Interest Sensitive Whole Life Insurance – An alternative plan that gives a variable rate on the cash value portion of the plan. This option allows for more flexibility as it gives the policyholder the choice of increasing their death benefit without having a higher premium.
- Single-Premium Whole Life Insurance – This option is designed for someone who wants to purchase a full policy upfront to avoid monthly payments. Similar to the previous two options, single premium whole life policies accrue cash value over time.
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Understanding the Cash Value
One reason that many people decide to go with a whole life insurance plan is due to the cash value component. What happens is that each time you pay your premium a percentage of the monthly dollar amount is moved into tax-deferred savings. Throughout time the cash value earns additional interest and grows at a rate predetermined by the policy. While the return on investment can be lower than other investment vehicles it is still a great way to remain covered while increasing your total personal assets.
Have Questions About Whole Life Insurance?
Life insurance is one of the most important insurances to carry throughout your life. That is why it is important to make the best decision on what type of plan or policy to go with. The agents at Advanced Insurance Concepts, specialize in helping clients find the right coverage for their goals. To get started today, give us a call at 816-476-8191.