Whole Life Insurance - The Policy Explained
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When you purchase a whole life insurance policy, you are getting a permanent policy. Having a “permanent” policy means that you are responsible for paying the premiums until you die. This is different than term life, which is only effective for specific periods of time and must be renewed at higher premiums or converted into a permanent policy.
Whole life insurance policies have the same premium rates throughout the time the policy is in force. As long as your payments are timely, the price is locked in. The money you pay in to a whole life policy builds cash value, meaning you can make money on your policy. The result is a modest dividend on your payments. Dividends on whole life policies can be taken immediately or applied to the price of your premiums to lessen the monthly cost. This money is exempt from taxes and so does not have to be counted as income.
While your policy is in force, you can borrow against the face value or withdraw funds from it. If you have done this and you die before you replace the money, your beneficiaries will not receive the full amount for which you originally paid.
Flexibility is not part of a whole life insurance policy. The insurance company is in charge of investments; and the face value and premiums cannot be altered by your authorization. You do not have the option of lowering monthly premiums or increasing the face value of such a policy.
The benefits of whole life lie in the dividends you can make and in financial benefits to chosen beneficiaries. If you do not want to mess around with investments and do not care about raising the face value of your policy, then whole life insurance is the perfect choice for your busy lifestyle.
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