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What Is Whole Life Insurance And What Are Its Main Selling Points?
By Myles Johnstone

Whole life insurance is different to term life insurance in that it lasts for a lifetime as opposed to specific periods of time, and there is also provision for death benefit as well as premiums staying constant. The cash value on whole life insurance is built as returns on a portion of the insurance premium that is invested by the insurance company. This cash value will be tax deferred till the time you take out the money, and it is also a means of obtaining loans.

Traditional And Interest-Sensitive Single Premium

There are a number of choices available with whole life insurance, and the most favored is the traditional and interest-sensitive single premium. The traditional option allows the insurer to get a guaranteed minimum rate of return on the cash value part of the policy, and interest-sensitive is similar to adjustable mortgage rates.

If you wish for more flexibility, then choose the interest-sensitive whole life insurance policy and you can get improved death benefits without needing to change the insurance premium, but it depends on the economy as well as the rate of return on the cash value portion.

On the other hand, the single premium whole life insurance policy will suit those that are in possession of big amounts of money, and who require to purchase the insurance policy up front. Single premium whole life insurance policies will also accumulate cash value with tax shelter on returns being the same as for other options.

Choosing the whole life insurance policy over other types of insurance will allow the insured to get a portion of the insurance premium money allocated to cash value that can help in paying off the insurance policy in its entirety in a short period of time. Besides, the insurance premium stays constant while you are insured, and if no changes are made to the policy, will stay the same during its entire lifetime.

With whole life insurance, you will also get tax savings and the rate of return is lower than other forms of investment, and thus it may not always make for the best investment decision. It does, however, prove its worth for those who require life insurance and the tax benefits as well as cash value are important factors that generally sway the insurer into choosing this form of insurance.

Whole life insurance also gives the insurer guaranteed coverage so long as premiums are being paid. Whole life insurance provides protection to dependents of the insured, and also helps to build cash value. The death benefits get paid to the beneficiary along with low risk cash value and tax-deferred cash accumulation.

About the Author
Myles Johnstone writes exclusively for finance related sites about such subjects as asset finance and commercial mortgages and other SMB Finance.

Source: Free Article

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