Why You Should Buy Whole Life Insurance
Reader’s Question:
Should I buy whole life insurance?
Andrew
Fayetteville, AR
Whole life insurance can be your choice of insurance if you’re considering purchasing it for long range goals. As long as you can keep making those premiums, your coverage is maintained permanently until you die. Here are some key features of this type of policy.
Level Premiums
Premiums for whole life policies are generally level and payable for life. Hence, it is better to buy your whole life policy while young to avail of cheaper annual premiums. You may opt to pay your premiums in shorter payment periods such as 15 years or go for a one time payment.
Dividends
There is a possibility that you can earn dividends from your whole life insurance. This happens when your actual costs of life insurance is lesser than your set premium payments. As a consequence, your insurer will return a portion of your premiums to you in the form of dividends. Dividends are not guaranteed yet since you would not know in advance the actual costs of your policy.
Cash Values
Whole life insurances are generally known for building up cash value overtime. A portion of your premium payments accumulate as guaranteed cash values. The amount of it will depend on the type of whole life insurance you own. You can also borrow against it as long as the policy is in force. However, borrowed amounts will reduce the death benefit and cash surrender value. Cash values will still be available to you even if you opt to surrender the policy. Under the present federal income tax law, cash value is tax deferred.
People who prefer whole life insurance policies tend to enjoy coverage with minimal risk. With this type of policy, the insurance company takes all the risks. So even if mortality costs are increasing, your policy cost will not be affected at all. Conversely, decreasing costs of insurance claims would allow insurers to reap extra profits out of your policy.