What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance designed to provide coverage for the insured's entire lifetime, as long as premiums are paid. Unlike term life insurance, which only covers you for a set period, whole life insurance offers lifelong protection and includes a savings component known as the cash value.
Here are the main features of whole life insurance:
Lifetime Coverage: As long as you continue to pay premiums, the policy remains in force for your entire life, not just for a specified term.
Fixed Premiums: Premiums generally remain the same throughout the life of the policy, making it easier to budget for them.
Cash Value: Part of each premium payment goes into a cash value account, which grows over time on a tax-deferred basis. This cash value can be borrowed against, used to pay premiums, or even withdrawn (though this can affect the death benefit and may have tax implications).
Death Benefit: The policy pays a guaranteed death benefit to your beneficiaries when you pass away, provided premiums have been paid.
Dividend Payments: Some whole life policies, especially those issued by mutual insurance companies, may pay dividends. These are not guaranteed but can be used to purchase additional insurance, reduce premiums, or be received as cash.
Whole life insurance is often chosen by people looking for long-term financial planning, estate planning, or a way to ensure their beneficiaries receive a guaranteed payout.
