Whole life insurance

It is permanent life insurance. It is protection that lasts your entire life. Term Insurance only covers you for a specific number of years. A whole life policy also has a "cash value" element to it. Therefore it becomes a life-long financial asset that has tax benefits. There is an underwriting process which often includes a medical exam. Then based on how long you are expected to live the insurance company sets four guaranteed values

Level premium for life: Never changes. As long as you pay the premiums the policy remains in force

Guaranteed death benefit: The amount paid to your beneficiaries upon death will never decrease

Guaranteed cash value: The cash value grows at a set rate each year until it equals the face amount of the policy at a specified age, somewhere around 100 - 121 years of age

A guaranteed endowment: A death benefit is guaranteed to be paid if the insured is still living at the age specified in the contract, typically age 100 or 121

It can take time for a while life policy to grow into a meaningful amount, but if policy premiums are kept up the cash value has a myriad of benefits that you can use while alive. At that point you can borrow money against your own money the policy`s cash value. You can also use it to pay premiums, or even cash it in at retirement.

If you purchased your policy from a mutual insurance company it can earn dividends which can increase your cash value. You can take your dividends in a myriad of ways:

• Take it in cash
• You can reduce the premium
• You can buy additional insurance
• Accumulate additional cash value
• Pay down any policy loans

While by points Whole Life Policies seem to have significant advantages consider over Term Insurance:

• You have guaranteed insurance for life
• You have a cash value if policy is kept
• Tax free benefits for the death benefit
• Tax deferred benefits for growth
• Liability Protection from creditor lawsuits
• Collateral for loans

Disadvantages of Whole Life Insurance:

• Affordability for enough insurance needed
• Lifetime premiums and ability to keep premiums up during income interruptions
• The opportunity costs with mixing insurance with investments
• There have been a lot of changes to term insurance that can change some these disadvantages but the major issue of affordability remains.

For probably the vast overwhelming majority of Americans the best choice is a small Whole Life Policy for about a $5,000.00 - $15,000.00 Death Benefit coupled with a term policy for the remaining life insurance protection needed. If kept up the Whole Life Policy can in the end serve as a Final Expense Policy at death.

Many insurance agents Promoting Final Expense Insurance are simply selling whole life policies. This works but you don't have to do this you can just buy a pre-paid. Pre-need funeral whether it's a cremation or traditional funeral. It just depends on your assets available to pay for a funeral now and upon your death. The case to at least buy a pre-need is simply funeral costs have historically doubled every ten years. There is all the carrots about controlling assets from the grave with trusts etc so if you care what happens after your dead you need to do more than buy insurance.