Benefits of Buying Whole Life Insurance
A Whole life insurance policy will payout a set amount of money to you beneficiaries upon your death. The main difference between whole life and term insurance coverage is you pay coverage for term insurance for a set number of years, and whole life pays as long as premiums are being paid.
The main benefits of whole life insurance are:
Protection for Life- the value never diminishes
- Guaranteed Level Premiums- your monthly policy premiums will never increase
- Cash Value- you can borrow against a certain portion of your premium as it build cash value
- Guaranteed Death Benefit- your beneficiaries receive a guaranteed amount
The choice to purchase whole life instead of term life insurance is personal, and depends on age, coverage goals, and finances. Initially when deciding between term insurance and whole life insurance you want to consider cost. Whole life costs much more than term life for the same amount of coverage. You can count on a guaranteed cost, but adequate coverage is something else to consider.
Is Whole Life Insurance Worth the Cost?
Premiums for whole life coverage can be as high as 8 times compared to term life coverage. Essentially it comes down to what you can afford. Instead of deciding to go without any life insurance like 30% of Americans, there are other options. You may choose to have convertible term insurance and whole life insurance.
The cash value of whole life insurance has a tax advantage. The money withdrawn will not be taxed until the amount you withdraw is more than the amount you paid in. An additional tax advantage of whole life insurance is dividends. Many insurers pay dividends, and normally they are taxed as gains, but the IRS treats dividends as a return of premium, therefore they are not taxable.
Whether you decide to buy whole life insurance or not depends on the outlook of your future in terms of physical and also financial health. The purpose of life insurance is to provide for loved ones in event of death. Choosing the right policy ensures this happens.