Whole Life Insurance Explained
A whole life insurance policy can be a key part of a family's financial security package. It is important to understand what is whole life insurance before a purchase is made. A whole life insurance policy has two components. A portion of the premium purchases insurance to pay a death benefit. The rest of the premium is invested by the insurance company and can accumulate cash value for the policy holder. This double duty is one the chief benefits of a whole life insurance policy.
Whole life insurance is a life insurance policy that remains in force for a person's entire or whole life. A death benefit will be paid by the insurance company as long as the premiums are current. The premiums remain the same throughout the whole of a person's life. The death benefit remains unchanged throughout the whole of a person's life. This certainty is one of the advantages of whole life insurance.
The investment portion of the whole life policy can be very confusing for some people. This is caused by the variety of ways the money is invested and made available to the policy holder. An individual insurance company may have several different whole life policies with different names but they will all have the advantages of whole life insurance.
The insurance company can explain to the policy holder exactly how the investment portion of the premium is handled. A non-participating whole life policy has a fixed rate of return that is guaranteed to the policy holder by the insurance company. A participating whole life policy returns money to the policy holder at a variable rate that depends on the performance the life insurance company's investments. Each policy holder can purchase a policy that fits their particular investment goals and tolerance for risk.
This investment portion of the premium accumulates cash value which gives a degree of flexibility to the policy holder. This money can be borrowed against if cash is needed at a future time. The money can be used to pay the premiums on the policy if the payments become difficult to make at some time. Some people even use the accumulated cash value to purchase additional term life insurance. The accumulated cash can often be used without tax liability while the policy is still in force.
Whole life insurance certainly has a place in every family's financial planning. Whole life insurance has predictable costs, flexibility and the promise of a substantial return on premiums paid. The variety of investment options available insures that a policy can be found to meet financial goals of everyone. The benefits of a whole life insurance policy can provide financial security and peace of mind.