Whole Life Insurance Explained
What is whole life insurance?
Whole life insurance is the most commonly bought kind of permanent life insurance. Permanent life insurance means that you’re covered for the rest of your life, given that you continually pay your premium on time.
Benefits of whole life insurance
· Your premium is fixed, meaning that no change in market conditions will affect the amount of your payment
· In some cases, you can take out loans against whole life insurance policies or withdraw cash
· If you pay your premium payments on time, then your death benefit is guaranteed
Fixed premiums and guaranteed death benefit
Unlike some other kinds of permanent life insurance, your whole life insurance policy will never raise the rate of your premium no matter the market conditions.
Also, if you don’t miss premium payments, then your death benefit is 100% guaranteed
Whole life insurance policies gather cash value over time
A portion of your premium payments go into the savings part of your policy, meaning that it grows in cash value over time. This can act as an emergency savings account, given that you might be able to withdraw the cash when needed or take out a loan against your policy.
Whether or not you can withdraw cash or take out loans depends on what insurance company you go with and which of their policies you choose.
Who does whole life insurance benefit the most?
If you’re the kind of person who enjoys predictability, especially when it comes to your insurance, then the whole life insurance policy is a smart move for you. Given the fixed premium, guaranteed death benefit, and possibility to withdraw cash or take out a loan if needed, whole life insurance policies offer consistent benefits and payments that you don’t have to worry about changing on you.
How much will whole life insurance cost me?
Like with most insurance policies, whole life insurance costs depend on many factors. These can be health and lifestyle related factors, as well as the amount of coverage you choose to buy.
Generally, premium payments are annual for whole life insurance. That’s a convenient, one time per year fixed payment. Some companies give the option to pay monthly or quarterly premiums but remember that those payment plans can come with extra fees.
Can I deduct whole life insurance premiums on my taxes?
No, your whole life insurance premium payments are not tax-deductible. The beneficiary who receives your death benefit most likely won’t have to pay taxes on that sum, though. However, any interest earned by your beneficiary on the death benefit is often considered taxable income.
Whole life insurance vs. term life insurance
The main difference between the two is that whole life insurance covers you for the rest of your life, while term life insurance allows you to choose a coverage period from 1-30 years.
Another difference is with premiums. Whole life insurance premiums are fixed and never change. Term life insurance premiums may start out less expensive, but they can be raised depending on market conditions.
Also, term life insurance policies don’t accumulate cash value like whole life insurance policies do, so you can’t borrow against them or withdraw cash. Some whole life insurance policies may even pay you dividends.
Plan IV in Troy, MI | Whole life insurance policies & more for individuals, families, & small businesses
We know that picking out the right kind of insurance for your needs can be complicated and intimidating. That’s why we, as a trusted local health planning company, are here to lead you through the confusion so that you get the right plan that covers your needs without draining your bank account. We offer a range of different insurance policies to keep you covered where you need it. We offer life insurance—long-term and short-term. We also offer health insurance, dental & vision, disability insurance, travel insurance, and more for individuals, families, and small businesses.
If you would like to speak with one of our expert agents to learn more about whole life insurance or any other insurance policy, give us a call at (248) 689-4910 or send in a contact form. We would love to help you get a better understanding of which policy is best for your needs and budget!