Is Whole Life Insurance Right For You? -

Whole life insurance, or cash-value life insurance as it is also known as, is a permanent form of life insurance which remains in effect for your entire life at a pre-set level premium. This type of life insurance policy makes a great choice if you do not expect your life insurance needs to diminish over time, and you want a consistent, level premium.

With whole life insurance, a portion of your premium goes into a reserve fund that is known as the cash value of the policy. The cash value of the policy builds up over the years as your policy remains in force. The cash values of a whole life policy grow in a tax-deferred basis, and you can borrow against them, or withdraw them.

The premiums will generally remain constant over the life of the policy and are set at the age the policy is taken out. Premiums can be paid on a monthly, quarterly, semi annual, or annual basis. Many life insurance companies offer the option of making a single premium, paying all of the premiums at once with a single lump sum. Your cash values will grow to equal the amount of the death benefit when you turn to age 100.

Although, whole life insurance is more expensive than its term life counterpart, it makes more sense to purchase if you'll be needing coverage for a long time. It also helps build an investment as well. The plus point is that the death benefit is guaranteed as long as premiums are met. Also, death benefits will never decrease if you don't borrow against it, and the proceeds are non taxable to the beneficiary.

Whole life insurance policy's returns will fluctuate with the markets and will usually follow returns available from other investments like equity mutual funds. However, if you decide to terminate your policy, your cash value can be paid in cash or paid-up insurance.

-Use it as a tax and estate planning vehicle,

-Accumulate cash value for a child's education or retirement,

-Pay final expenses,

-Provide money for a favorite charity,

-Fund a business buy/sell agreement,

-Provide key person protection.

Before buying the whole life insurance, you need to think carefully about choosing your level of coverage. Too often people make the mistake of insufficiently covering or even worse, financially overextending themselves. This would be a tragic error with whole life insurance policy because defaulting on premium payments can mean policy cancellation and the loss of your entire investment. So be careful and make sure you:

-Look for a life insurance policy that has a guaranteed cash value starting at the very first year,

-Choose the one with the highest cash value in the very first year,

-Consider "participating" insurance policies which can pay dividends, increasing your policy's value by boosting both the total cash value and the death benefits,

-Beware of any insurance policy that levies "surrender charges" when you cancel.

-If you ever decide to stop paying premiums, your policy lets you use the accumulated cash value of the life insurance policy to pay the premiums, thus keeping your coverage current.

If you are in the market for life insurance coverage, talk to your agent about the many benefits of whole life insurance.