6 Key Things You Should Know About Whole Life Insurance

Whole life insurance, otherwise known as whole of life assurance, is a form of insurance policy that covers you for life and as long as you can pay the premiums. Whole life insurance has been described as the best option especially if you want your loved one to be taken care of when you are gone. Unlike term life insurance policy that you pay for say 10 or 20 years, whole life insurance does not expire. Now, let’s dive into the six key things you need to know about whole life insurance. These include:

Cash Value

On top of the usual policy, whole life insurance has a savings part – the cash value. To build this cash value over time, you can opt to add more money in addition to the regular premiums. Why cash value? You might ask. In the event of an emergency, you can request to withdraw the funds – tax-free of course. This whole life guide from PolicyAdvisor.com helps explain some forms of life insurance policies that can be beneficial to you and your loved ones. When it comes to the whole life insurance policy, you can take out a loan against your cash value at affordable interest rates. However, due to this cash value component, this policy becomes more expensive. If you are not sure of what’s right for you, have a sit-down with your insurer and get all the information you need.

Uniform Premiums

Are you worried that when you hit old age, your premiums will significantly increase? Unlike other policies, whole life insurance premiums remain uniform throughout the insurance period even if other conditions change. So wipe that worry off your face and focus on saving for that overdue trip to the beautiful Bahamas with your family. The only time these premiums increase is when you add more money to build more cash value.

It’s For A Lifetime

Understandably you might be worried that if you hit 100, will the policy still be in place? The majority of insurers, including yours, increase the maturity age from 100 to 120 years. This means that, if you are lucky to reach that old ripe age, you’ll still be covered. Your insurer will let you know that the benefits will be paid out in the event of death or after the maturity age of 120 years. So worry not, pay your premiums as stipulated in your policy and in time, and you’ll still be covered.

Hidden Costs

Of course, everybody wants to earn money without having to pay taxes. With whole life insurance, you can withdraw funds tax-free from your cash value. On the other hand, you might also borrow against this cash value, and that’s where you incur a cost in the name of interests that accrue from the word go. Unfortunately, you might withdraw past your limit, leaving little cash value that can pay for your premiums. The downside to this is you have to pay the premiums out of pocket and this can disrupt your long overdue vacation or that investment you’ve been working on.

Premium Determinant Factors Still Stand

Just because premiums are uniform throughout the insurance period, your insurer will still determine the amount. The factors that determine the amounts of premiums still apply. There are determinant factors that can and will affect the premiums. Among the factors include: 

  • Your age
  • Health history for you and your family
  • Criminal history
  • Any drug and substance use and abuse
  • Any dangerous hobbies
  • Credit history
  • Mode of dividend reception
  • Payment period if you choose to pay for the policy in a short period.

Other Riders

Due to the expensive nature of whole life insurance, you can choose to add a rider to your policy. Fortunately for you, your insurer can throw in the rider such as health insurance for free or at a lower cost. The purpose of this rider is for your insurer to protect your death benefits in case you become chronically ill or become disabled. It pays to have such riders included in your whole life insurance policy as they help to protect your interests. 

The above are critical elements to know when it comes to a whole life insurance policy. You’ll be better off informed rather than go it blindly. You now don’t have an excuse not to apply for one. But then again, it depends on your financial stability and preference. Fortunately, you have different planks best suited for your specific needs.