How Does Whole Life Insurance Actually Work?

//How Does Whole Life Insurance Actually Work?

There are many compelling reasons to buy an insurance policy, but one of the most common desires of those looking to be insured is security. Whether that means security for the future of your loved ones or security of an investment in the future, people desire a policy that can give them peace of mind. If you’re one of the many people looking for a secure policy, whole life insurance may be for you. Though it’s price may be a bit off-putting at first, you’ll quickly see the unique benefits it has once you understand exactly how it functions. So how exactly does whole life insurance work?

What Are The Basics Of Whole Life Insurance?

Whole life insurance policies are a type of permanent insurance policy, meant to cover you for the rest of your life. Unlike term policies, whole life insurance doesn’t have a set date when it needs to be renewed. This allows whole life insurance to have a big advantage over term policies: fixed premiums. With a term policy, your premiums will be raised every time you renew the policy. This is fine in the short term, but if you’re looking for long-term security you’ll find yourself wasting money quickly.

With a whole life plan, you and your insurance provider will agree on an amount as a premium, and that amount will stay locked in as your premium for as long as you keep the policy. These premiums are usually paid annually on a set date, but many providers can make accommodations for quarterly or monthly premium payments as well.

In the event of your death, an amount of money known as a “death benefit” will be paid to a beneficiary of your choosing. Typically, this money is used to cover the loss in salary for the deceased’s spouse, cover funeral expenses, handle outstanding debts, and generally provide for anything the family and friends need during the time of loss.

How Are These Policies Priced? 

If there’s one thing that worries people who research whole life insurance policies, it’s the price. Since whole life insurance is meant to be a permanent fixture in your life, the premiums do start out much higher that that of temporary plans. Additionally, if your provider deems you a risky individual to insure (due to medical conditions, a history of smoking, or other similar reasons,) your initial premium will go up.

There are two things to keep in mind when looking at the high price of these premiums. First, remember that whole life insurance is meant to last a lifetime, meaning even though you’ll be paying premiums, you won’t ever have to renew the policy. Second, remember that those premiums stay fixed, meaning they won’t ever increase. You could get a temporary policy to have lower initial premiums, but if you intend on keeping the plan for your entire life, your premiums will rise every time you renew the policy. These premiums will quickly rise higher than the ones you’d be paying with a whole life plan! If you’re looking for lifelong insurance, whole life policies may start high, but they’re the better choice in the long run.

Are Whole Life Policies A Sound Investment? 

Perhaps you’re looking to buy insurance for a different reason: investment. If this is the case, you’ll still want the security that a whole life policy provides, even though you’re not looking to get death benefits. Each whole life insurance policy features a “cash value,” which is what you’ll need to pay attention to if you’re looking for insurance as an investment. When you pay your premiums, a portion of those premiums is saved as cash value. This builds over time with a fixed interest rate set by your provider. At any time, you can cancel the policy and receive the cash value back, making it a fantastic option for anyone looking to invest.

Whole life insurance policies are known for their stability, and there’s no exception here. Unlike other investment types, investing in insurance is risk-free. You don’t have to worry about the value of an unstable market here. Investing in a whole life policy means you won’t lose you money. Additionally, your cash value isn’t tax-deferrable, meaning you’ll get the full amount when you decide to take the funds. With complete security and an investment that grows with every premium payment, investing in insurance is a sound and attractive decision.

Stable, Secure and Sound 

Does whole life insurance work for you? Is it what you need to make sure your loved ones are taken care of after you die? Is it the perfect investment into the comfortable and happy future that you deserve? Look into the function of a whole life policy, and you’ll see it offers peace of mind for a wide range of needs, but in the end, what’s important is whether or not it’s right for your needs. The best way to learn if it’s right for you is with a free quote from TermLife-Insurance.com. In 30 seconds, you’ll get an accurate quote that you can trust, and when you’re ready to make your purchase we’ll be here to help every step of the way. Whether you’re looking for security of investment let Local Life Agents help you take the next step.

By | 2017-05-05T11:55:46+00:00 September 29th, 2015|Blog|0 Comments

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