Warning! There have been some policies promoted in the market lately that you will need to know about…
Make sure that the whole life policy you are considering –IS NOT a “modified whole life insurance policy”.
These “modified” policies are not the same as a standard whole life insurance policy. Modified policies were created by companies trying to trick buyers into thinking that they are the same. The beginning costs are lower but for a very good reason:
The difference is in the policy language. A modified whole life policy’s premiums will increase dramatically over the life of the policy.
They start out very low and rise to unmanageable levels.
If you are considering a modified whole life policy you NEED to actually read the policy language. Few people read their policies. They take their agents at their word, and stick their policy in the safe deposit box. Big mistake!
Whole Life; The right Life insurance policy? Advantages of Whole Life Insurance policies:
1. A whole life policy is a policy that can cover the insured person for their entire life.
2. The premium amounts due will not increase as the insured becomes older.
3. The face amount stays the same
4. Face amount will be paid out to the beneficiary upon insured’s death.
5. The policy will gain a small amount of interest on the cash value of the policy. Usually 2%-4%
6. Cash value is assessed by payments made, minus insurance costs, plus interest.
7. If policy is canceled insured will be refunded cash value of policy, plus interest, minus any fees.
8. Loans may be taken out against the cash value. The loan will have to be paid back plus interest under the terms of the policy. Otherwise, the remaining cash value of the policy will be used to satisfy the payments. If not caught up, the policy will likely lapse.
Who might benefit the most from the advantages of whole-life insurance?
Most of us can benefit from having a while life insurance policy if we are honest. The benefits are that they gain interest over time. They provide a death benefit to a beneficiary in the case of our death, and they offer some security to cover expenses as well.
The only real negative to whole life insurance policies where other cheaper policies are concerned is only in the area of costs. Term life insurance is cheaper, and for many of us offers better coverage because we can get more coverage for cheaper. You might pay four times as much or more for a 500,000 whole life policy as you do a 500,000 term life policy. That’s a tough financial pill to swallow if you ask me.
Whole life insurance does have its place though and in my opinion it is usually as a backup to a larger term life policy. So you may have a 500,000 term life policy, but then also have a 50,000 whole life insurance policy as well. This is typically the way I would stack them if you were planning to use both.
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