Whole life insurance might seem like just another way for companies to take your money, but in reality, it can be a very useful purchase, especially if you have a family. This insurance can help ease the financial burden when you die so your family won't lose any of their assets and you can have peace of mind in knowing you won't leave them unprepared.
Definition
Whole life is a kind of insurance that protects you for your entire life. You pay a premium for the coverage and the remainder of the money goes into an investment fund, which builds money over time. At the time of your death, your beneficiaries will receive a payout to help cover funeral expenses and keep up with bills.
Benefits
Whole-life insurance offers numerous benefits. It can build interest over time and can be used to take out loans against it while you're still alive, if you need to repair your house or put your child through college, for instance. Your premium is very unlikely to change, as well, so you'll pay the same amount into the policy when you're older as you did when you were young.
Types
Under the category of whole-life insurance, there are three different types from which you can choose. The standard policy lets you withdraw cash, and there is a guaranteed minimum return rate. Another type is the single-premium policy, which requires that you pay a large payment when you sign the contract. You don't have to pay any other payments, and interest will build on what you initially invested into the policy. The last type is interest sensitive, which means it has a variable interest rate attached to the value of the policy, and the amount that is paid out at the time of your death will rely heavily on the state of the economy at that time.
Considerations
You will need to determine the size of your insurance policy considering your age, health, bills and whether or not you have children. Calculate your needed benefit amount considering your current income (and expected future income) and your expenses. Multiply that by the number of years you want to support your family, and you'll have a rough estimate of how much your policy should be worth.
Duration
Payments for whole life insurance plans depend on what type of policy you buy and how long you want to pay premiums. In most cases, you'll pay premiums until you reach a predetermined age. You can quit paying the premiums sooner, but it will require making larger premium payments over a shorter period of time.
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