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Whole Life Insurance Explained

How Whole Life Insurance Works

Whole life insurance explained.

Why is it that people still prefer to own whole life insurance even though term life costs so much less?

The question that people should really be asking is..."is term life really cheaper?"

You really put out a lot less for term insurance and if you died within the term period you had made the correct decision when you bought term.

The question is what if you don't die in that term period? Had you settled for a smaller amount of whole life insurance you would have some money to get back.


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Whole Life Insurance Explained

People buy whole life simply because they get something back if they don't die. You can also keep whole life for as long as you live but term only lasts for a specific number of years.

  • Non Par Whole Life

    You can decide to buy non participating whole life insurance. It costs a little less than the participating whole life policy. Non par whole life has cash values but no dividends.

    It will take longer to break even with your cash values if you don't die. Also keep in mind that your cash values accumulate at a predetermined, guaranteed, rate.

    After a few years the cash values begin to build up and you always have some cash to fall back on if you need to. You can borrow against your cash value or you can surrender your policy for it's cash value.

    I would not recommend surrendering the policy though as you may still need life insurance at present or in the future.
  • Participating Whole Life

    Is whole life insurance explained on other pages on this site? Yes it is. I will therefore only give you a brief breakdown of the policy here and refer you to the detailed explanation on another page.

    Participating whole life cost even more than non participating whole life. This policy has all the benefits of non participating whole life policy and then some.

    Participating whole life insurance policies pay dividends if the company keeps down expenses and have successful investments. You therefore will break even with your cash values earlier as the dividends can be added to your cash values.

    Keep in mind that dividends are not guaranteed. Go to this page for a breakdown of participating whole life insurance. Mutual life insurance carriers, though not always, usually pay a higher dividend than stock life insurance companies.

    Mutual companies are owned by the policy owners and stock companies are owned by the shareholders.

Go to this page where you will find whole life insurance details.


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