What Is Whole Life Insurance
Whole life is a type of permanent life insurance for those who want a stable policy with the possibility of increasing funds over time. It is based on a death benefit system in which you sign a contract with the insurance company, establish a set premium for you to pay, then a payout is issued when you (the policyholder) pass away. Here is a clarification on these terms so you can better understand the functions of whole life insurance:
- Permanent Life Insurance: This means that, rather than having to renew or find a different life insurance policy after a period of time, you will continue to receive coverage until you pass away so long as you keep up with your premiums.
- Premiums: These are monthly payments that you must make in order to keep your coverage. The exact amount you pay depends on your age, health, and sex.
- Death Benefit: This is the purpose and goal of the whole life policy—it is the agreed-upon amount of money that is issued.
- Beneficiary: This is the person or people you choose to receive the death benefit.
The Benefits of Whole Life Insurance
Whole life insurance offers a lot of positive security and stable potential income. You can use a whole life policy as a savings plan as well as insurance—not only can you then access these savings as needed, but there’s a potential increase as well.
When invested, these savings can grow without the risk of losing your death benefit. This added cash value can be used during your lifetime any way you choose.
Whole vs. Term & Universal Life
Whole life is one of three main insurance policies, the others being term and universal life. Term life is only purchased for a period of time, such as 10 to 30 years, unlike whole life, which lasts your lifetime.
Universal life is another permanent insurance option, but with more options and opportunities for investment. You can pay more or less on your monthly premium and even pay it off entirely if able and desired.