Insurance is a great way for us to prepare for some of the surprises in life that we have no control over. Many people see it as a great way to have security but it can also be an opportunity to invest in your future. Here’s a few thoughts about life insurance and hopefully they help you decide if its for you or if its not.
A whole life insurance is the most established type of permanent insurance policy that you can get on the market. Its ease of use together with its stability makes it a well-liked option. Under this kind of insurance policy, you will get permanent life coverage throughout your life. The policy doesnâ€™t lapse, provided you are always paying premiums every year to keep it active.
Furthermore, the premiums and the death benefits that are quoted at the beginning of the policy will remain same throughout the coverage period. But, because your insurer will be investing your premiums, the policy can accumulate some cash reserves that you can use as premiums, savings, or another source of investments.
1. Lifetime policy
The policy will cover you for your whole life. Despite the fact that the premiums are more expensive, there is no worry regarding the possibility of premiums increasing, as it might be the case if you have a term life insurance policy, especially when the first term
2. The investment/savings feature
In case you are not good at investing or saving your money, then you may want to consider a whole life insurance policy. The money you invest in the stock market or any other investment and even the funds that you will leave in your savings account will earn interest which is taxable by the IRS.
But, the incredible benefit of this insurance policy is that you can take non-taxable loans from it. Besides, unlike other types of insurance, the benefit that is paid to the beneficiaries is also non-taxable.
3. It is guaranteed
The premiums that you pay are always guaranteed. The benefits are also guaranteed. It would take very unusual and extreme circumstances for huge insurance companies to fail.
1. Expensive policy
This policy will cost you more than what you could have paid in case you had chosen to have a term life policy. This is so since a portion of the premium that you pay is used to cover cash value accumulation feature.
2. Low-interest rates
The interest rate that you get on the cash value accumulation portion can be considerably less compared to if you had invested the money elsewhere. This is more of a long term investment and not a short investment where you see a higher interest rate.
3. It is inflexible
The policy is inflexible compared to other types of policies. You can know how the premiums that you pay are being used. You can`t also know the portion of your premiums that will be applied when determining death benefits.
The above are some pros and cons of a whole life insurance.