What is Whole Life Insurance?
July 13, 2009 |
Featured, Whole Life
Life insurance is actually a contract in which the involved parties, the insured and insurer, agree that the insured will pay insurance premiums for a stated period of time, and in exchange for this the insurer will pay a death benefit to the insured’s beneficiaries in a case where the insured dies. Whole life insurance is a type of life insurance that can also be classified as an investment.
Whole life insurance is insurance that covers the insured person’s whole life. A death benefit is definitely paid in the event of the insured’s death. This is different than with term life insurance, where a death benefit is paid only if the insured dies during the term, or period of time, that is specified within the insurance contract.
The main advantage to whole life insurance is that the payment of the death benefit is certain. The insured’s beneficiaries definitely will get a payout if the insured dies. For individuals who want to make sure that their families are financially secure in the event of their death, they will often choose whole life insurance. This form of insurance policy is a lot more expensive than other types of insurance such as term life. This is because the insurance companies are ensuring that the insured’s beneficiaries will receive an accumulated insurance payout in the event of the insured’s death.
Balanced cover and maximum cover are two main types of cover for whole life insurance. Maximum provides a guarantee that the premium payment and insured sum will not be raised during the first ten years of the policy. There will not be a premium increase until after this period has passed and the plan is reviewed. Balanced cover seeks a balance between life insurance and the policy owner’s life investments in order to sustain insurance coverage in the insured’s later years.
The amount of the insurance premium usually depends on the amount of coverage and the person’s age and sex. Women’s premiums are usually lower because women have longer life expectancies than men.
Whole life insurance is appropriate for individuals who are looking for lifetime protection coverage. It is intended for individuals who are looking for a level of safety that is higher than that offered by other types of life insurance. Individuals who do not want to see their premiums increase with age usually choose whole life over other forms of life insurance. It is more cost effective than other types of life insurance such as term life due to the fact that premiums do not increase every year and payout on the benefit is certain. Other advantages to this type of insurance is that cash value builds up in the policy as well as the stability of the policy premiums despite any discrepancies in expense charges or mortality.
Whole life insurance is an ideal form of insurance for individuals with long term goals. This is due to the build up in cash value and the ease of withdrawal in case of emergencies. However the premium costs for whole life insurance are always more expensive than term insurance due to the certainty of the death benefit payout. The ability of the policy payer to make their premium payments will determine what the accumulated death benefit will be received by their beneficiaries.
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