???????Whole Life Insurance: Pros, Cons & Who Should Buy

Permanent life insurance policies are designed to protect your family and loved ones after you pass away. While the coverage is more expensive than term policies, whole life insurance offers many benefits worth considering. Keep reading for everything you need to know about whole life insurance.

What is whole life insurance?

Whole life insurance is a permanent life insurance policy. It is also known as cash value or money purchase life insurance, which means you pay monthly premiums and earn interest on your investment.

There are two parts to whole life insurance: the death benefit and the cash value account.

The Death Benefit

The death benefit is the money paid out to your beneficiaries when you die. The amount is usually fixed, but the insurer can adjust it depending on your age and health at the time of death. The death benefit is the primary purpose of whole life insurance. It is what you get if you die, and it varies based on your premium paid, age, and health at the time of cancellation.

The amount of death benefit that you receive will depend on different factors, including:

• Premium paid
• Age
• Health at the time of cancellation (in some cases)

The Cash Value

The cash value account is also called a savings account because it contains money that belongs to you until you die or withdraw it from the policy. You can borrow from this amount if necessary, but only for certain reasons like paying off debts or college tuition costs (some policies have borrowing restrictions).

Pros of Whole Life Insurance

One of the most apparent advantages of whole life insurance is that it protects your entire life. Unlike term life insurance, which only pays out when you die, whole life offers coverage for the rest of your lifetime, even if you never make a single claim. The longer you are alive, the more money you can potentially save.

Here are some other benefits of whole life insurance:

It builds cash value that earns interest over time.

Whole life builds cash value that generates interest over time, tax-deferred. You can borrow or withdraw funds from your whole life policy at any time, and all withdrawals or loans reduce your death benefit until you repay them.

Whole life has a guaranteed premium that never increases.

The first thing to understand about whole life is its guaranteed premium. This means you don't have to worry about paying more in the future. Even if your health changes or you need more coverage, your premiums will stay the same.

The guaranteed cash value grows over time to match the guaranteed death benefit.

The cash value of your whole life insurance policy is the amount you can borrow from your policy. It grows over time, just like any other investment. The more you make monthly payments, the higher your cash value.

You can borrow or withdraw funds from your whole life policy.

You can borrow from your cash value account. If you want to take out money, it will be returned to the policy in the form of a loan you must repay within five years of its issuance. This can be useful if you want to use the funds for something other than retirement or medical expenses, such as paying off debt or buying a house (if allowed).

Who Should Buy Whole Life Insurance?

Generally, whole life insurance is better suited for people who don't expect to file for benefits often or at all. It may be right for you if you need long-term financial protection and are willing to pay a premium that represents a significant commitment. By purchasing whole life insurance, you can typically build up a cash value that can be used to cover certain expenses should you become unable to work. 

When considering whole life insurance, it is essential to research and weigh the potential benefits and drawbacks. As with any financial product, whole life insurance can be complicated, so it is vital to seek advice from a financial advisor who can help determine if this type of coverage is right for you. You can find more tips for choosing the right life insurance policy here.

For these reasons, many people choose whole life insurance as part of an overall financial strategy to protect their assets against an unexpected event like the loss of a job or ill health.