Demystifying Whole Life Insurance

Know your Financial Terms- What is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance that is guaranteed to remain in force for the insured’s entire life, as long as the premium remains paid. Like other types of life insurance, whole life insurance pays out a death benefit payment to your beneficiary if you should die.

With Whole life insurance, you have the option to pay throughout your life, or pay until the age of sixty-five, or pay off the cost of your policy earlier.

In addition to a death benefit payment,  whole life insurance also has cash value savings, enabling you to accumulate interest on a tax-deferred basis. A growing cash value is an essential feature of whole life insurance.

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The policyholder can borrow the cash value against a loan, and the loan attracts interest. Interest rates vary with different insurers. Unpaid loans reduce the death benefit when due. Withdrawals and overdue loans also reduce the cash value of the policy.

Whole life insurance tends to be a more expensive form of life insurance compared to term insurance mainly because it offers savings and borrowing aspects along with a payout to your beneficiary.

 

WealthyPlanet's "Wealthopedia"  series demystifies financial terms and financial industry lingo. 

 

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