Whole Life Insurance
Whole Life Plan Explained
Why would someone buy whole life insurance? After all, term insurance
cost much less.
Can one justify paying more premiums for the same death
Why would a buyer even consider the purchase of whole life?
examine the facts. Let us try to uncover the things that nobody wants
you to know.
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Whole Life Insurance Explored
- The Premiums
Yes, you would, initially, need to put out more for your whole life policy
than you would for therm insurance. I say initially because, as you
will learn, further down this page you can use your dividends to reduce
premiums. This means that you would pay less than the premiums
contracted for. That is if the company pays a dividend.
- The Death Benefit
You whole life policy pays the face amount of the policy to a
named beneficiary upon the death of the insured free of Federal Estate Taxes. This money can be paid
in one lump sum or in income form. You can keep your policy for as long
as you choose, even to age 100. The life of term policies are limited to
specific periods. The death benefit of whole life insurance never
decreases. So regardless of how you die your whole life policy will pay the sum you are insured for.
- Cash Values
Whole life policies have cash values
or cash surrender values. Here is how this works. If you keep you
policy for a specific period of time you will begin to build up
guaranteed cash values. These cash values pay a guaranteed interest rate
each year. This can amount to quite a considerable sum over time, even
more so when added together with the dividends. Dividends, however, are
You whole life policy may earn a dividend
each year. If the life insurance company you have your policy with
performs well they will pay a dividend on your policy. If they keep down
expenses and are effective with their investments they transfer much of
this profit to the policy owner in the form of a dividend. Dividends
can be paid in different forms. Here are your options.
Paid In Cash
You may take your dividend in cash. Each year, usually beginning
with the second or third policy year the life insurance company will
send you a check for the amount of dividend that is applied to your
Accumulate At Interest
You may choose to leave your dividend with the company to
accumulate interest for as long a period as you desire. Whenever you
choose to take it you can.
Purchase Paid Up Additions
You have the option of electing to apply your dividends to
purchasing paid up additions. Paid up additions are tiny single premium
whole life policies. They have a cash value and continue to earn
interest. They also have proportionate dividends applied to them.
As mentioned above you may use your dividend to reduce your
premium. If you elect to apply them in this manner you will pay less in
premiums than you initially expected to.
As you can see whole life insurance
is quite different from term life insurance. A term policy pays only
upon the death of the insured. With whole life insurance there are
benefits gained if you live a long and healthy life. There is definitely
a choice as to the type of policy you buy. It is all up to you.
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Life Insurance Articles
Whole Life Insurance - Understanding The Whole Life Policy