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There are two main advantages to purchasing a whole life insurance policy. The first is the death benefit that your beneficiaries will receive when you die. The second is the fact that you can use whole life insurance as an investment; such a policy builds cash value. Certain types of whole life policies enable policy holders to build cash value almost immediately; this means that they can surrender their policy for its cash value or borrow against it when interest rates are low.
Premium Payment Options You will normally pay higher premiums for a whole life policy rather than a term life policy because the former includes an investment value. However, you will normally have a choice of various payment methods for a whole life policy. In most cases, you will pay lower premiums when you first purchase your policy because of your age and your reduced risk of dying. As you grow older, your risk of dying will increase, posing a greater risk to your insurance company; therefore, you will be charged higher premiums. If you anticipate that your income will continue to increase as you age, a whole life insurance policy can be very beneficial. Limited Premium Whole life insurance On the other hand, your earnings may decrease as you near retirement. In this case, you can choose to purchase limited premium whole life insurance. With this type of insurance policy, you will have to continue paying premiums for the policy to remain in effect. Normally, this involves paying premiums for the rest of your life and paying more as you grow older. However, with a limited premium whole life policy, you can pay the entire cost of the insurance within a specified time period. You will be covered until you die or until you reach 100, unlike a term life insurance policy. The downside is that you will pay much higher premiums than for term life coverage. Level Premium Whole Life Policy Another option is to purchase a level premium whole life policy. You will pay a set premium for the entire duration of the policy. This means that you will pay more than the cost of your insurance in the beginning. The difference will then be invested to pay for the difference between the cost of your insurance later on and the cost of your premiums. Graded Premium Whole Life Coverage You can also purchase a graded premium whole life policy. This is a suitable option if you anticipate that your income will continue to increase until you retire, at which point it will decrease. Policy holders pay small premiums when they first purchase a graded premium policy; this reflects their lower income level when they first start a career. The premium will gradually increase until it reaches a specified amount or time period. At that point, your premiums will begin to decrease. This can present an affordable option so you can continue life insurance coverage after you retire. Fortunately, there are several premium payment plans available if you decide to purchase a whole life insurance policy. Be sure to talk to your insurance agent about limited premium, level premium and graded premium options. By reviewing your personal and financial situation, you can find a plan that suits your needs. |
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