What is whole life insurance?
Whole life insurance is a subtype of permanent life insurance that provides lifelong coverage to the insurer. It comes with a guaranteed death benefit as well as living benefits. The living benefits are secured in cash value accumulation, also referred to as the tax-deferred saving component. The policy remains active as long as the premiums are paid, which remains constant throughout the life term. Any adult above the age of 18 can acquire the whole life insurance policy. Parents also acquire whole life insurance for their children from 14 to 17 to secure a lifetime extended coverage plan and lock in a low-rate premium. The whole life insurance is recommended for only those who want to acquire life-term financial stability. It is chosen by people who tend to have a high-income rate because Whole Life Insurance can get a little expensive.
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What Are the pros of Whole Life Insurance?
Whole Life Insurance is beneficial as it provides lifetime coverage. The policy comes with a guaranteed death benefit which means that upon the death of the insurer, the insurance money is paid out to the beneficiaries so chosen by the insurer to carry out the final expenses or pay the debts.
Whole Life Insurance has the feature of providing living benefits to the insurer. This is done by the accumulation of the cash value against the premiums. This is also referred to as the tax-deferred saving component of the policy. The insurer can access the cash value while he is alive by either withdrawing it or borrowing against it. To add to these benefits, the fixed premium payment during the duration makes it easier for the insurer to pursue this policy without any fear of the premium rate hike.
How much does whole life insurance cost?
The Whole Life Insurance cost is dependent on the age, gender, medical history of the insurer, and the coverage amount. The premium rates are set as per the requirement, but they are to be paid for a lifetime. Such as, for the coverage amount of $100,000, the average premium payment is $89 monthly. Usually, insurers are unable to pay, and they surrender during the period. In the case of surrender, the company does not reimburse the death benefits rather pays only for the cash value after subtracting the surrender charges from it.
Cash Value Accumulation in Whole Life Insurance
The most attractive feature of Whole Life Insurance is the cash value accumulation against the paid premiums. Only a tiny portion of the premiums is converted into the cash value; the rest goes to the coverage amount. It is tax-free and can be easily accessed by the insurer. The primary purpose of the cash value accumulation is to support the insurer in the time of need. Therefore, the accumulated cash value can be withdrawn or taken as a loan by the insurer. In the case of a loan, the money has to be returned with an interest rate.
Which Is Better: Term Life or Whole Life Insurance?
The decision to choose between term life or whole life insurance depends on the requirements of the insurer. Term Life Insurance offers coverage for a specific term, and the benefits are limited to a guaranteed death benefit. In contrast, Whole Life Insurance provides lifetime coverage with death benefit and saving component. On its face, the monetary benefits of whole life insurance outweigh the financial benefits of term life insurance.
However, Whole Life Insurance can cost 15 times more expensive than term life insurance. The premiums are to be paid for a lifetime which can become a source of worry for the insurer. In the case of surrender, the returned benefit is not up to the mark. Therefore, whole life insurance is only recommended to the people who can afford the life-long costly premiums. It is also suitable for those who want lifetime coverage with the tax-free saving component.
Graded Benefit
Best Whole Life Insurance Companies
March, Northwestern
Northwestern
Northwestern Mutual is an American insurance company that was founded in 1857. It provides Whole Life Insurance to individuals up to the age of 85. The premium payments can be made either till the age of 65, 90, or lifetime according to the period selected. The minimum death benefit offered is up to $25,000, but it can be increased as per the requirement.
March, Mass Mutual
Mass Mutual
Mass Mutual Life Insurance is a Massachusetts-based company that was established in 1851 and offers a wide variety of insurance services. It was rated A++ by AM BEST. Mass Mutual provides whole life insurance with fixed premium rates with a varying age limit and the coverage amount. For some policies, the minimum coverage is $25,000, but for others, it is $100,000.
March, New York Life
New York Life
New York Life Insurance was established in 1845. From a wide range of services, New York Insurance offers coverage amount of up to $10,000. It is available for all consumers, even individuals above the age of 90. The premium rates are fixed once selected and can be paid for five years minimum to a period of 75 years maximum.
March, State Farm
State Farm
State Farm Life insurance was founded in 1922 and operates with a wide range of insurance policies for life, auto, and property. It was rated A++ by AM Best. The whole life insurance policy is provided to individuals who are up to the age of 85, and the minimum coverage amount is $50,000. The application for this policy can be processed online. The whole life insurance policy also provides the children term rider option.
March, Guardian
Guardian
Guardian Life Insurance is a New-York based insurance company that was established in 1860. It provides the whole life insurance policy that starts with the coverage amount of $25,000. Policies are available for people of every age group from 0 to 90. The coverage and the premium rates are fixed.