Whole life insurance is one of the types of insurance policies that covers the policyholder for the entire lifespan of the individual. Apart from being a cover to you, it also ensures the payment of death benefits to your loved ones after your demise. These various benefits come with the associated cost to the insured in terms of regular premium payments. This policy often requires a saving component that allows the accumulation of cash value over time. Compounding cash value is an integral part of the insurance policy.
Therefore, in this article, we shall consider how this Whole life insurance policy can guarantee the financial future of your loved ones and how to make a perfect choice of a life insurer.
How Whole Life Insurance Protects Your Family’s Financial Future
Some of the ways the policy guarantees your financial future and that of your loved ones include:
- Level Premium payments
Under this life insurance policy, the amount of regular premium payments stays the same throughout the entire period of the policy. In addition, some insurers may allow you to pay up the policy as early as possible in order to mitigate the effect of inflation. Once you have completely paid up all the premiums under the policy, the insurance coverage will be in effect till the debt benefits are paid out at your demise.
- Protection till Death
The whole life policy comes with an assurance that your loved ones will receive a death benefit irrespective of when eventuality comes. There is no fixed date for the policy to lapse, which means greater security and comfort for the policyholder. You can also use the life policy to guarantee a generational transfer of wealth.
- Tax Savings and Advantages
One of the greatest advantages of a whole life policy is that the death benefit received is absolutely tax-free. Also, there is a cash value component attached to the policy that continually grows tax-free over the term of the policy. Apart from the cash growth tax incentives, the policyholders can withdraw from the cash vault without being taxed as long as the withdrawal amount is lower than the cash value.
- Potential Dividends
One of the biggest pluses of this life insurance policy is the potential of being paid dividends by some insurers. Dividends received from this plan be utilized for several purposes. You can use it to pay up the premiums on the policy or contribute it to your retirement savings plan.
Choosing the Right Whole Life Insurance Policy for Your Needs
It is important to note that the whole life insurance policy may take different forms. Policy seekers must know which one perfectly suits their financial strategy. Some insurers usually offer diverse variations that may carry different payment schedules, investment options, or specific tailor-made policies.
Here are the various types of whole life insurance policies that potential policyholders may choose from:
- Guaranteed issue
- Limited payment
- Joint life insurance
- Simplified issue
- Reduced paid-up
Factors to Consider When Making a Choice
All necessary cares must be taken when considering taking up a whole life coverage. This is to avoid some pitfalls that may become sources of burdens to either you or that of your loved ones. Some of the factors you should assess before making a choice include:
- Maximum Age Coverage
It is paramount to determine the maximum age covered by your potential insurer. Find out if your plan provider has age limit under the terms of the policy. You hould know that some providers has upper age limit of 70 while others offer 99 years. A few insurers provide a coverage of beyond 100 years. Note that the further you go beyond 99 years the higher the premiums. On the other hand, insurance coverage below 80 may be inadequate if you are still in you youthful age bracket.
- Claim Guarantee Conditions
Another factor to take into consideration is whether an insurer has claim guarantee conditions in place. Claim guarantee conditions ensure that death benefits are paid expressly and without delay. While a policy without claim guarantee conditions usually has between 30 and 40 days deadline before benefits can be claimed.
- Premium Payment Regime
It is advisable to choose a plan that ensures premium payments terminate at end of your working years. You bet you don’t want to keep occupying yourself with premium payments after retirement. Therefore, its essential to go for a policy that gives the allowance to pay up premiums within the shortest period of time.
- Family Peculiar Needs
In addition, the suitable while life policy will be the one that is tailored towards your family peculiarity and current financial situation. For instance, if your financial goal is to offer a long-term coverage for your dependent, there are some policies that may provide cheaper premium payments.
Whole Life Insurance vs. Term Life Insurance
Both term life insurance and whole life have some shared similarity in terms of payment of benefit at the occurrence of the death of the policyholder. Term life insurance is usually taken to cover a certain period of time. The term ranges from 20 years to 40. Also, premiums tend to be lower because of the limited number of years it covers. It is mandatory for the policy holders to renew the policy once the existing one expires, if you want to continue to enjoy the coverage.
On the contrary, Whole life insurance is taken to guarantee coverage for the lifespan of the holder. It does not terminate at the expiration of the term of the every but at the cessation of life of the policyholder. The cost of premium is always higher than that of the term life. But the upside of the whole life policy is that there is cash value component that grows over time. This cash value may be used by the policyholder in the future.
Whole life insurance policy is a type of insurance coverage that guarantees the financial security of your loved ones after the demise of the policyholder. It is also a conduit through which wealth can be passed down from generation to generation. This life insurance policy offers various incentives that make it the most desirable policy. Since there are many types of this life policy, it is important that you consider relevant factors in making a choice. Some of these factors include claim guarantee conditions, personal financial goals and family needs as well as maximum age coverage.