Whole Life Insurance Policy: The Need to Plan Ahead
For someone who wants to ensure the long-term financial health of his or her family, a whole life insurance policy is the right choice. The benefits will do much more than cover immediate costs, such as medical or funeral bills. Because there's a savings feature, this policy will help provide for your family. And while premiums can be high in the short term, smart online shopping can usually lower them quickly.
The Basics of a Whole Life Insurance Policy
There are four main attractions of a whole life insurance policy. One, you will have a policy in place for your entire life. As long as you pay your premiums, your coverage will be there. Two, the longer you pay premiums, the more value accrues. It's like a savings account. In fact, most policies allow you to surrender them for cash value or borrow cash from them after a certain time. Three, premiums generally stay the same for the life of the policy, so your costs are fixed and predictable. And four, your beneficiaries will receive the benefits regardless of when you die.
Whole vs. Term
Term life insurance is pretty straightforward: you buy a policy for a specified period of time, or a "term." In that sense, a whole life insurance policy provides coverage for your entire life, which is beneficial. On the other hand, premiums are higher for the whole life policy because of this advantage. And yet, if you renewed a term policy for years, you would eventually pay more in premiums, since costs usually rise year to year--but likely remain fixed for whole life coverage.
Types of Whole Life Insurance
In a very broad sense, there are two options to choose from: participating and non-participating. Basically, you pay higher premiums for a participating policy, but you're then able to receive dividends from the policy. This might mean a payment back to you, or it could be used to reduce your premiums or give you additional coverage or savings. There are several options within these categories. You can choose level premiums, which are fixed, lower, and continue for the life of the policy. Much of these will go into your policy savings. Or you could opt for a limited payment whole life insurance policy, which means you pay a higher premium for a short period of time. You could even choose a single premium, which is more like an investment account. For a large up-front payment, your cash benefits will be immediately available. An indeterminate premium plan means your insurer might change the premium on occasion, though there is usually a ceiling on what you will have to pay.
Look Around Before You Choose
When deciding what kind of whole life insurance policy is best for you and your family, a lot will depend on what you're able to pay at the outset. Perhaps you can pay a significant amount up front, which saves you money later in life--perhaps after you've retired. Or you may decide that you can use that money in other ways, and opt for a budget-friendly set payment over a longer period. Luckily, you can compare quotes online for dozens and dozens of whole life policies, and if you use a free service like NetQuote.com, you can do so without much of a time commitment. It's easier than ever to find the right protection for your family without spending too much money.