There are two main types of life insurance- term life and whole life. Term life insurance is temporary insurance that will last for a certain amount of time, or term. Whole life is permanent insurance that builds cash value.
How does whole life insurance build cash value? Whole life insurance will last for your entire lifetime, as long as you continue to pay your premiums. The fixed premiums are higher than a term life policy and that’s because a portion of your premiums are invested by the carrier. You can look at it as a built in savings element or, as some people refer to it, “forced savings.”As you pay your premiums, your policy will build cash value. This cash value is tax deferred until you decide to withdraw or borrow against it. If you die, your beneficiaries receive the death benefit, which is the face amount of the policy.
If you withdraw your cash value without surrendering the policy, then you are essentially borrowing against your life insurance policy. The carrier will charge you a specified interest rate until the money is returned to the policy. Any money that is owed at the time of the insured’s death is subtracted from the death benefit.
Whole life cash value insurance has advantages and disadvantages. One advantage is that the premiums are level for life. A whole life policy also has the ability to build cash value, tax-deferred. A disadvantage is that it costs much more than term life insurance. You should weigh the pros and cons of whole life insurance for your particular situation. Be sure to speak with an experienced agent to determine which type of life insurance is best for you. Get some free quotes for term life and whole life to compare the difference in cost.
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Whole life insurance is permanent life insurance that builds cash value. The premium payments are level for life so you don’t have to worry about a rate increase as you get older. Your policy will last your entire lifetime as long as you continue to make your premium payments. When shopping for whole life insurance, it may seem a little daunting because there are dozens of carriers to choose from. You might be wondering where you can find the cheapest whole life insurance, but you want to also make sure that you choose a financially sound company. This is important because a portion of your premiums will be invested by the carrier and the returns that they make is what builds the cash value in your policy.
Here are some simple tips on how to find the cheapest whole life insurance rates as well as a financially strong company.
Work with an experienced agent. This is one of the most important parts of shopping for life insurance because the rates and underwriting requirements of life insurance carriers can vary greatly. The difference in premium from one carrier to the next can vary by as much as 30% to 40% for the same amount of insurance. There are so many places where you can find life insurance quotes so you want to make sure you choose a reputable company with a short and easy quote form.
Be upfront about your health and your needs. If you have high blood pressure or cholesterol or any other health issues, it is to your benefit to disclose it so your agent can steer you towards the carrier with the best rates for those conditions. By withholding information, you run the risk of being rated up or declined. This may not seem like a big deal and many people think they can just go apply to the next company, but a decline or a “rate up” will leave a permanent mark on your medical information bureau record and other insurance companies will be leary when they see it.
Choose a company with a solid financial rating and a good history of returns. With whole life insurance, the cash value that builds up in your policy is based on the returns made by the life insurance carrier. So it is important that you choose a company that is financially sound. Life insurance companies are given ratings based on their financial strength so be sure to ask your agent about the ratings for carriers that he or she recommends to you. Get a free quote today to compare multiple rates.
Whole life is permanent life insurance that builds up cash value and it can also pay dividends. This means that you’ll have life insurance coverage for your entire life, as long as you continue to pay your premiums. Your policy will never be canceled so it is a good choice if you want life insurance coverage for the long-term (longer than a 30 year term policy, for example).
There are two main types of whole life insurance policies- non-participating and participating. The difference between the two is that participating whole life policies pay dividends. These dividends come from successful investments made by the life insurance carrier, as well as favorable mortality rates. You can choose to take your dividends in several ways.
Cash. Your dividends can paid be paid to you in the form of cash and you can use that cash in any way you choose. Life insurance carriers will typically mail these dividend payments to you in the form of a check.
Reduce your premiums. Your dividends can be used to pay a portion or all of your premium payments. For example, if you have a $200 dividend payment that is due to you and your premium payment is $1200 annually, you can choose to have your dividend be paid towards the premium due. So you’ll end up paying $1000 for the difference. In some cases, if the dividends are large enough, it can pay the premium entirely.
Pay off a policy loan. If you have borrowed from your whole life insurance policy, then you can choose to have the dividends be used as payment towards the loan balance or towards the interest due.
Once you decide on how you want your dividends to be paid, you’ll have to contact your life insurance carrier so they can update your policy with the correct mode of payment.
