What Is Whole Life Insurance

It seems like term life insurance gets most of the promotion these days. Most financial advisors usually tell their clients to buy term. Their theory is that term is cheaper, and they can take the extra money and invest it so they will have enough savings to cover themselves in the future. That is a good theory, but it does not always work out in the real world, so permanent life insurance has a place.

Whole life is permanent life insurance. That means it will cover you for your entire life as long as the policy stays in force. Keeping a policy in force usually means that it is paid for or paid up. Many people pay for whole life with monthly premiums, though some policies can be paid up over a period of years. Some policies can even be paid up in one single premium, though that has some tax implication you will want to consider before you purchase it.

If you have a whole life policy, and you live to be 100 years old, you will probably get the entire face value of it as a century birthday present. If you do not survive that long, your beneficiaries will get the cash. That cash amount is usually tax free.

Whole life insurance can, given time, build up a cash value. That means that the policy will have a value that can be cashed in or borrowed against. Term life, on the other hand, usually does not build up any cash value, and can only be used as life insurance. So whole life can combine savings with life insurance.

Financial professionals like to advise their clients that insurance does not make a good investment, and that is why they should buy term and invest the difference. However, in these days of shaky stock markets and very low interest rates on savings accounts, a guaranteed return from an insurance company looks pretty competitive.

Who buys whole life insurance? Well, this product is marketed to everyone from children to senior citizens.

Parents or grandparents buy policies for their children and grandchildren because it is cheap to insure a child, and because rates wil still level through their whole lives. That way they can give the child a gift a lifetime security that will also build a cash value.

Adults may buy term, but also add a whole life policy. Younger adults will still find competitive rates, and know that their whole life policy will not expire in 10 or 30 years, just when they are older and more expensive to insure.

Senior citizens, up to age 85, can find small face value whole life policies to use to cover funeral bills and other final expenses. That way they can plan for this large financial strain without being a burden to their children and grandchildren. Sometimes the grown kids of a senior citizen will purchase a policy for their parent as part of their elder care.

Term is popular now, but you can see, many people may desire a whole life insurance policy.