Nsurance Info
Whole
Life Insurance
Whole
life insurance, also known as “cash-value” insurance is a
basic and consistent type of permanent life insurance
which remains in effect your entire life at a level
premium. This life insurance is a good choice got you if
you do not expect your life insurance needs to diminish
over time. A portion of your premium goes into a reserve
fund called ‘cash value’ that builds up over the years
your policy is in affect. Your reserve fund is
tax-deferred and you can borrow against it, until you
withdraw it.
The
premiums must generally remain constant over the life of
the policy and must be paid periodically according to the
amount indicated in the policy. You may also have the
option of a single premium ----- paying all of the
premiums at once with a single lump sum. Your cash values
will grow to equal the amount of the death benefit when
you turn to age 100.
Although, whole life insurance is very expensive, and if
you're on a limited budget, you may not be able to afford
all the insurance coverage you actually need. But the plus
point is that the death benefit is guaranteed as long as
premiums are met. Also death benefit will never decrease
if you don't borrow against it.
Whole
life insurance policy's returns will fluctuate with the
markets and will usually follow returns available from
other investments like equity mutual funds. However, if
you decide to quit your policy, your cash value can be
paid in cash or paid-up insurance.
Whole
life insurance is most suitable for you, if you want to:
- use it as a tax and estate planning vehicle,
- accumulate cash value for a child's education or
retirement,
- pay final expenses,
- provide money for a favorite charity,
- fund a business buy/sell agreement,
- provide key person protection.
Before buying the whole life insurance, you need to think
carefully about choosing your level of coverage. Too often
people make the mistake of insufficiently covering or even
worse, financially overextending themselves. This would be
a tragic error with whole life insurance policy because
defaulting on premium payments can mean policy
cancellation and the loss of your entire investment. So be
careful and make sure you:
-
pick a life insurance policy that has a guaranteed cash
value starting at the very first year,
-
choose the one with the highest cash value in the very
first year,
-
consider "participating" insurance policies which can
pay dividends, increasing your policy's value by
boosting both the total cash value and the death
benefits,
-
beware of any insurance policy that levies "surrender
charges" when you cancel.
-
if
you ever need to stop paying premiums, your policy lets
you use the accumulated cash value of the life insurance
policy to pay the premiums, thus keeping your coverage
current.
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