Advantages of Whole Life Insurance
When it comes to fining affordable life insurance, the internet is the best tool to use. There are many different types of life insurance policies that people can choose from, and understanding these differences will help the individual choose the right life insurance policy. Each life insurance policy provides advantages to consumers in a number of key areas that are involved with planning for someone’s financial future. One of the most popular types of life insurance policies that people are attracted to is whole life insurance. The advantages of whole life insurance can be clearly seen when compared to term life insurance policies.
The first obvious advantage to whole life insurance is the fact that it never expires. Individuals that have a whole life insurance policy will never have to renew or purchase life insurance again. On the other hand, term life insurance is only provided to the policy holder until it expires. Term life insurance policies are typically purchased for 10, 15, 20, 25, and 30 year increments. Once a term life insurance policy expires, the individual will be required to start up a new policy. Whole life insurance guarantees coverage to the individual until they are deceased.
Another huge advantage to whole life insurance is the cash value that builds up throughout the life of the policy. Cash value benefits can be used to help pay for a child’s education, or it can even be used to buy a house. On the other hand, term life insurance policies do not provide cash value benefits to the policy holder. However, if a policy holder wants to convert their term life insurance policy to a whole life insurance policy, they have the freedom to do so. Cash value benefits can be used by the policy holder for a wide variety of reasons with whole life insurance.
Another advantage that whole life insurance provides is how premiums are paid. Premiums are locked in at a set rate, which means the rates will never increase on the policy holder. While inflation causes gas prices and bread prices to rise, whole life insurance premiums never rise. The cost of living rises because of constant inflation, and having a life insurance policy that never has a premium that rises is a huge advantage to the policy holder. Term life insurance policies have a premium that rises according to the age and health of the policy holder.
No matter how ill that someone becomes with whole life insurance, they will never be charged a higher rate on their premium. People should keep in mind that a life insurance policy that has a rate that never increases will actually become more affordable in the future because of inflation. Basically, inflation erodes away the expenses of whole life insurance. For example, someone who has purchased whole life insurance 30 years ago will still pay the same premium as they did when they first started paying for the policy. Whole life insurance policies also have cash value tax advantages as well.
Cash value benefits that accrue with a whole life insurance policy are not taxed. On the other hand, 401k investments have a tax deferment program, but the individual will be required to pay taxes when withdrawing funds from the account. Whole life insurance does not have taxes on money that is withdrawn from the account. The advantages that whole life insurance provides are not to be underestimated. In fact, having a whole life insurance plan is a lot like being your own banker. Whole life insurance policies also pay dividends in the form of a return on the premium, which are not considered a gain.