Whole Life Insurance
Whole life insurance, also known as "cash-value" insurance is a
basic and consistent type of permanent life insurance which
remains in effect your entire life at a level premium. This life
insurance is a good choice got you if you do not expect your
life insurance needs to diminish over time. A portion of your
premium goes into a reserve fund called 'cash value' that builds
up over the years your policy is in affect. Your reserve fund is
tax-deferred and you can borrow against it, until you withdraw
it.
The premiums must generally remain constant over the life of the
policy and must be paid periodically according to the amount
indicated in the policy. You may also have the option of a
single premium ----- paying all of the premiums at once with a
single lump sum. Your cash values will grow to equal the amount
of the death benefit when you turn to age 100.
Although, whole life insurance is very expensive, and if you're
on a limited budget, you may not be able to afford all the
insurance coverage you actually need. But the plus point is that
the death benefit is guaranteed as long as premiums are met.
Also death benefit will never decrease if you don't borrow
against it.
Whole life insurance policy's returns will fluctuate with the
markets and will usually follow returns available from other
investments like equity mutual funds. However, if you decide to
quit your policy, your cash value can be paid in cash or paid-up
insurance.
Whole life insurance is most suitable for you, if you want to:
* use it as a tax and estate planning vehicle, * accumulate cash
value for a child's education or retirement, * pay final
expenses, * provide money for a favorite charity, * fund a
business buy/sell agreement, * provide key person protection.
Before buying the whole life insurance, you need to think
carefully about choosing your level of coverage. Too often
people make the mistake of insufficiently covering or even
worse, financially overextending themselves. This would be a
tragic error with whole life insurance policy because defaulting
on premium payments can mean policy cancellation and the loss of
your entire investment. So be careful and make sure you:
* pick a life insurance policy that has a guaranteed cash value
starting at the very first year, * choose the one with the
highest cash value in the very first year, * consider
"participating" insurance policies which can pay dividends,
increasing your policy's value by boosting both the total cash
value and the death benefits, * beware of any insurance policy
that levies "surrender charges" when you cancel. * if you ever
need to stop paying premiums, your policy lets you use the
accumulated cash value of the life insurance policy to pay the
premiums, thus keeping your coverage current.
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