What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance that provides coverage for the insured's entire lifetime, as long as premiums are paid. It combines a death benefit with a cash value component, which grows over time, providing both financial protection and an investment opportunity.
Key Features
One of the main features of whole life insurance is its guaranteed death benefit, which is paid to beneficiaries upon the policyholder's death. Additionally, the cash value accumulates at a guaranteed rate, allowing policyholders to borrow against it or withdraw funds if needed.
Premiums
Whole life insurance typically requires fixed premiums that remain constant throughout the life of the policy. These premiums can be higher than those of term life insurance, but they contribute to both the death benefit and the cash value accumulation.
Cash Value Growth
The cash value of a whole life policy grows over time, typically on a tax-deferred basis. Policyholders can access this cash value through loans or withdrawals, but it's important to note that any unpaid loans will reduce the death benefit.
Why Consider Whole Life Insurance?
Whole life insurance is suitable for those seeking lifelong coverage and a way to build cash value. It offers financial security for beneficiaries and can be a strategic component of an overall financial plan, especially for estate planning and wealth transfer.