Most of us know about life insurance, but we often get confused and complicated about it. To simply understand, there are two types of life insurance: whole life insurance and term life insurance. And yes, there are so many differences between these two policies, as well as benefits you can get from it. We are now going through whole life insurance to understand more about how it will work for you.
Firstly, what is whole life insurance?
The main purpose of whole life insurance is to provide a financial protection to your loved ones or organizations you care about after your death. As the name indicated, whole life insurance will cover for your entire life. When you sign the contract, your premiums will stay stable for your lifetime. Unless you want to change your policy, your premium rates may change as well. As the result, the amount of premium you have to pay for whole life insurance will always be more expensive than term life insurance. However, the benefits you receive will be much more.
How whole life insurance ideally for your beneficiaries?
Aside from the death benefit that your beneficiaries will receive, they or you can as well receive cash value from whole life insurance policy. If you add this rider in your policy, even you can receive the cash value benefit from life insurance. The “cash value” is like a saving account in your life insurance policy and it funded by the percentage of your premiums. Your insurance company will pay interests on your saving account and guarantee a minimum yearly return. The best benefit of cash value is that you can withdraw to use it for your retirement. Be mindful that your saving money will not be taxed, but the interests you earn will be taxed. If you don’t withdraw in advanced, it will absolutely go to your beneficiaries beside the death benefit.
Whole life insurance can be complicated, but you should focus on these factors when going through a policy.
Because of the benefits, whole life insurance usually is far more expensive than term life insurance. When considering purchasing life insurance, you should plan for long term payment; it means your entire life. In the situation, you are no longer being able to afford for the policy, you can receive cash value in return, but the amount may be low and not worth it.
It’s wisely to talk to an insurance advisor to find the right plan for your financial situation.