Whole Life Insurance – What is it?
Whole Life Insurance What is it?
Whole life insurance is a permanent insurance policy that serves as both life insurance and an investment opportunity for the insured member. This means the policy may be used for money for beneficiaries after death of the insured or used by insured themselves (when still alive) during a financial emergency. A whole life insurance policy will last throughout the policy holder's life, with no need to renew or apply again. As long as premiums are paid there is no need to worry about the life insurance policy again. This is a great option for those looking to get a policy and forget about it.
Whole life insurance policies are taken out for a certain amount of payout money. For example, if an applicant chooses a $250,000 policy, this is the amount of money that is payable to their beneficiaries on their death. The monthly payment amount is the same throughout the entire policy, and is never raised or lowered. The policy holder is entitled to this fixed payout, even if they become ill or disabled. This is a great option for young and healthy adults looking to invest money, while also providing their family with future financial security.
The policy holder has the choice to keep their life insurance policy active or cash out their policy for the money. If the policy holder chooses to cash out their policy for money the policy is closed and no longer exists. Whole life insurance policies earn interest during the length of the policy. Policy holders may cash out only the interest portion of their policy, or they may simply borrow from it and pay it back later. If interest is cashed out or borrowed, the beneficiary pay out amount is lowered until the money is paid back to the policy.
Whole life insurance policies are recommended for young, healthy applicants. Since these types of insurance are supposed to be paid into over a period of time it would make no sense for an elderly person to purchase such a policy. They are likely not to invest much money into their policy, and payout would not be very high. Whole life insurance policy premiums are based on the age and health of the applicant, and an elderly person may have such a high premium that it is not worth the cost in the long run to get this type of insurance. Term life insurance policies may be a better option for older applicants, as they are often more affordable.
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