What is Whole Life Insurance?
Whole Life Insurance is an insurance plan that offers lifelong coverage, while building cash value over time. Whole Life Insurance provides financial security in the event of the policyholder’s untimely death, giving the insured and their loved ones peace of mind knowing their family has a measure of financial protection. Whole Life Insurance also accumulates a cash value while providing coverage over many years, meaning policyholders can access or borrow against this additional savings if desired. Whole Life Insurance is worth considering for those searching for some level of long term stability and assurance.
How Does Whole Life Insurance Work?
Whole Life Insurance rates are determined based on the applicants age, medical conditions, desired coverage amount, and the life insurance company. From there, premiums are typically paid monthly, quarterly, or biannually. Premiums are fixed throughout the lifetime of the plan and the death benefit is certain.
Along with offering life insurance coverage, Whole Life Insurance policies become a cash asset over time. A portion of the paid premium is allocated to the policy’s cash value, which grows at a fixed rate set by the insurer, which is typically in the 1% to 3.5% range. Once enough cash value has accumulated, the policy holder may take out loans against the policy. After the policyholder has passed away, the beneficiaries will typically receive a payout that is exempt from income tax.