December 16, 2023 | Fairlyeven

A Quick Guide to Whole Life Insurance

A Quick Guide to Whole Life Insurance

Whole life insurance policies are a viable option for long-term financial protection. When you need coverage that will last your entire life rather than a set term, a whole life policy may be worth exploring over term life insurance. A whole-life policy may benefit investors in many ways, including tax-free loans, cash value building, and a guaranteed death benefit.

How Whole Life Insurance Works to Guarantee Lifelong Coverage and Wealth Growth

Taking out a whole life insurance policy offers guaranteed lifelong death benefits as long as you pay the premiums consistently. The premiums are level, meaning the policyholder will pay a fixed amount month after month. Along with providing lifelong coverage, these policies help accumulate cash value and guarantee returns over time.

Policyholders pay level premiums throughout their lives, contributing to the death benefits and a cash value account. Once they have built enough cash value, they can start borrowing tax-free loans against their policies. Eventually, the beneficiaries will get the death benefit in payouts that are not subject to income tax.

The advantages of whole life insurance include guarantees of lifelong coverage and a death benefit as long as premiums are paid. It also offers a savings component through the growing cash value.

However, whole-life policies typically have higher long-term costs than term life due to the lifelong and added cash value components. Premiums also do not decrease even as you age or your income dwindles.

Factors to Consider when Choosing a Whole Life Insurance Policy

Choosing the right whole life insurance policy requires serious research and knowing what to look for, especially charges, riders, and hidden terms.

When determining how much life insurance you need, consider what you want the policy to accomplish. A smaller policy, such as $15,000, may suffice to cover funeral expenses, but you may need a larger policy to fund other priorities, such as a trust for a child.

Riders can offer extra benefits for certain conditions, like a disability waiver that allows you to skip payments if you're unable to work. Consider riders carefully to determine if they make sense for your needs and budget.

Be aware of surrender fees if you cancel your whole life insurance policy in the first 10-15 years. Surrender charges can be high, especially in the policy's early years, and decrease over time until they disappear.

Wrapping up

Ready to make informed decisions for lifelong coverage and wealth growth? Join Fairlyeven and navigate the complexities of whole life insurance with confidence.