To get started, you need to understand that life insurance falls into two main categories: whole and temporary. The basic difference between term insurance and whole life insurance is as follows: A temporary policy is life only coverage.
In a whole life insurance policy, as long as you continue to pay the premiums, the policy does not expire for life. As the term applies, whole life insurance provides coverage for life or until the person reaches 100 years of age. Whole life insurance policies accumulate a cash value (usually starting after the first year). With a lifetime, you pay a fixed premium for life instead of the increasing premiums found on renewable term life insurance policies. In addition, whole life insurance has a cash value feature that is guaranteed. In the long term and for life, the entire premium must be paid to maintain the insurance.
With level premiums and the accumulation of cash values, whole life insurance is a good choice for long term goals. In addition to permanent life insurance protection, whole life insurance includes a savings component that allows you to create a cash value with tax deferral. The policyholder can cancel or redeem the whole life policy at any time and receive the cash value. Some whole life insurance policies may generate cash values greater than the guaranteed amount, depending on credit interest rates and market performance. The cash value of whole life insurance policies may be affected by the future performance of a life insurance company. Unlike whole life insurance policies, which have a guaranteed cash value, the cash value of variable life insurance policies is not guaranteed. You have the right to borrow against the cash value of your whole life insurance policy on the basis of a loan. Proponents of whole life insurance say that the cash value of a life insurance policy should compete well with other fixed income investments.
Unlike term life insurance policies, whole life insurance offers a guaranteed minimum benefit at a premium that never changes. One of the most valuable benefits of a participating whole life policy is the ability to earn dividends. The insurance company, based on the overall return on its investments, establishes the benefits of a whole life insurance policy. In addition, while interest paid on universal life insurance is often adjusted monthly, interest on a whole life insurance policy is adjusted annually. Like many insurance products, whole life insurance offers many policy options.
Make sure you can provide long term whole life insurance and don't buy whole life insurance unless you can afford it. You should buy all the coverage you need now when you're younger, and if you can't afford whole life insurance, at least get term insurance. This is why whole life insurance policies have the highest premiums, it is insurance for your whole life, no matter when you die. The uniform premium and the fixed death benefit make whole life insurance very attractive to some. Unlike some other types of permanent insurance, with whole life insurance, you cannot lower your premiums.
