Advantages and Disadvantages of Whole Life Insurance – What to Consider Before You Buy
Advantages and Disadvantages of Whole Life Insurance What to Consider Before You Buy
The purpose of life insurance is to provide your family with some financial security in the event of your untimely passing. During your living years, you pay a premium to ensure that your family will have some extra finances to fall back on once you are no longer with them. The peace of mind you experience today and the benefits your family eventually experience are the reasons behind why people purchase life insurance policies. If you are considering a whole life insurance policy, you will be interested to learn the advantages and disadvantages of this insurance selection.
The advantages of whole life insurance are many. First, your premium is locked into place so the payments you make are the same today as they will be five years from now. The only way the premiums can change is if you get a kind of whole life insurance policy that allows you to decide how much you pay. You will never be forced to pay more in order to keep your policy. Plus, your policy builds cash value over time so it can actually serve as a means of investing. Fortunately, this money is tax deferred so you can use it to save for your children's college funds or for retirement. In case of emergencies, you can withdraw the funds as well.
All of these great benefitsand moreawait you when you choose whole life insurance over term life insurance, but there is a major disadvantage. You will be required to pay four of five times more for a whole life insurance policy as compared to term life insurance. The overall cost of having the policy along with administration fees and mortality charges can really add up. While this certainly presents you with a reason to reconsider your decision, the investment opportunities offered with whole life insurance give you the chance to earn more money in the long run. Some people argue, however, that the investments often cannot make up for the high cost of whole life insurance.
As you select between term and whole life insurance, you must decide what you can afford to spend and where you would make your investments if you chose a whole life insurance policy. In the end, no matter which kind of policy you ultimately choose, you will enjoy peace of mind today and provide your family with a financial safety net after you have passed on.
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