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.
Related Posts:
How to Find the Cheapest Whole Life Insurance
Whole Life Dividend Paying Life Insurance
What are the Advantages and Disadvantages of Term Life Insurance?
Is Getting Permanent Life Insurance A Good Idea?
Life Insurance at 65 Years Old
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.
Your life insurance needs change along with the phases of your life. At 65 years old, you probably don’t need as much life insurance as you did when you were 30. This is assuming that your children are grown and have made it through college and your home is paid off. Age 65 is when most people make the decision to retire so it’s the perfect time to reevaluate your life insurance coverage. Whether your group coverage is ending because of retirement, your term policy is expiring, or you just want to downgrade your life insurance because you don’t need as much coverage, there are still plenty of options for life insurance at 65 years old.
Term Life Insurance at 65 Years Old
At this age, most carriers will allow up to a 20 year term, which will give you insurance coverage until you are 85 years old. Here are some examples of what a $150,000 20 year term policy might cost you. This is based on a preferred health rating.
65 year old non-smoking male: $1890.00 per year
65 year old non-smoking female: $1265.00 per year
These rates are assuming that you are in great health. If you have some health issues, as most seniors do, you can expect to pay a little bit more. High blood pressure and cholesterol and common issues for seniors and, when adequately controlled, do not pose as much of a problem as more serious health problems such as cancer, heart disease, or a history or stroke or diabetes. If you have some of these health issues, then be sure to get a free quote from an experienced agent. In most situations, you can still find life insurance coverage but you’ll need to find the right carrier to cover you. An experienced agent will be able to guide you in the right direction to the carrier who has the best rates for you.
Whole Life Insurance at 65 Years Old
If you want permanent coverage that will last you for the rest of your life, then whole life insurance is a great option at 65 years old. You can get a smaller policy for final expenses and be comfortable knowing that your family will be able to take care of funeral and other expense if / when something happens to you. Whole life insurance costs more than term life, but your premiums will be level for the rest of your life and the coverage is there whether you live to be 66 or 106. Here are some rate examples for a $35,000 whole life insurance policy. These rates assume good health.
65 year old non-smoking male: $260.44 per month
65 year old non-smoking female: $201.12 per month
These are just some examples to give you an idea of the cost. Because life insurance premiums are based on many other factors such as height, weight, driving history, occupation, and family health history, it is best to get a quote from an experienced agent to find out what your rate would be.
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.
