You are worth a lot, especially to those who depend on you to take care of them financially. Unfortunately, as unpleasant as it may be to think about, you will die one day. The good news is that your worth doesn't have to go away after you're gone. If you choose to purchase and maintain a whole life insurance policy, you can financially protect your family or other beneficiaries when that day comes.
Types
Whole life insurance falls under the umbrella of permanent life insurance. Traditional whole life insurance guarantees a yearly premium. It also offers the policyholder's beneficiaries a guaranteed sum of money when the policyholder dies, assuming the policyholder maintains the account. Moreover, it guarantees the policyholder a set cash value if he cancels the contract.
Universal Life and Variable Life insurance also fit under the permanent life insurance umbrella. A Universal Life policy offers a flexible premium as well as adjustable benefits. It guarantees maximum limits for premiums and it also offers guaranteed cash values and death benefits. A Variable Life policy guarantees yearly premiums and minimum death benefits, but it doesn't guarantee a set cash value. Since the Variable Life policy also requires policyholders to choose their own investments, it is only a wise investment opportunity for people willing to do research.
Death Benefit
Policyholders aren't limited to allocating death benefits to family members. According to New York Life Insurance Company, in addition to being used for survivor needs, the death benefit can also usually be used for mortgage protection, transfer of wealth, business needs and charitable giving.
Value
Whole life insurance plans come with higher premiums than do term insurance plans. However, higher premiums can equal better value. The value of the account increases over time without taxes. Premiums and interest are like kindling to the cash value and death benefit flame. The cash value is one main distinguishing factor between a whole life and term policy.
A whole life policyholder may receive the cash value if he surrenders his policy and a term policyholder does not. A whole life policyholder can also borrow cash value at interest rates that are generally lower than those of bank loans. He might use it for anything from education to a house down payment.
Perks
Whole life policies are generally predictable with set premiums. They are also more inclusive than term policies; assuming the policyholder paid all premiums, beneficiaries are given the death benefit regardless of when he dies. The major perk of whole life insurance is cash value, which accumulates tax-deferred.
Disadvantages
Whole life insurance policies are tangled in restrictions because the insurance company is ultimately going to have to pay the policyholder or his beneficiaries. Whole life insurance policies also come with high premiums for this reason. Alternately, taking out a term life insurance policy is simpler and cheaper because term life insurance only offers death benefits if a policyholder dies within a set time period. If a 10-year term policyholder dies 11 years after he took out the policy, his beneficiaries receive no money.
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