Whole life insurance is a type of permanent life insurance. That is, the coverage and the paying of premiums continue all of your life. As long as your premium payments are made in a timely fashion, your insurance protection will last all your life. Upon your death, your benefactor will be given a guaranteed amount. Your premium payments are set at a certain level and cannot be increased. In addition, you can also choose the type and quantity of payments you want to make on your policy.
When paying premiums on whole life, a portion of each payment adds up toward a cash value. The insurance company then invests the cash value, which grows tax deferred as long on the policy continues. However, policy loans and interest will be taken away from your death benefit should you borrow against the cash value.
Whole life is more expensive than term insurance during the beginning years; however, because whole life premiums don’t increase as you get older, it is may be a good idea to buy whole life especially if you need long-term insurance. Whole life insurance usually gives lower investment returns, so if you want a higher investment return, you may want to check out variable life or variable universal life.
With a whole life insurance policy, you are able to give over your policy for cash value. Over a period of time the policy adds up to a cash value. Then when a policy is given up or surrendered, you the owner are allowed a portion of the cash value. Depending if there are any outstanding loans or unpaid premiums that will decide how much you the owner of the policy will receive.
In addition, you the policy owner will be able to borrow money from the policy if you wish, as long as there is enough accumulated cash value to get the loan. In some cases, there is a waiting period before that can happen.
The benefits of whole life insurance are: fixed premiums for life, death benefits, a sum of cash value, and you may receive the cash value if you stop making premium payments. The lesser benefits of whole life are: it is more comprehensive payment system than term life, usually higher premiums, and in most cases, more costly.