Whole Life Explained
Whole life policies provide permanent life insurance protection with the benefit of cash value accumulation. Learn more about the features of whole life here.
About Whole Life
Before you get whole life insurance quotes, it may help to learn a bit more about how such policies work. Whole life insurance provides permanent life insurance protection and premiums that never increase. Unlike term life insurance, whole life insurance policies accumulate cash value over time, which makes their death benefits more valuable than those of other policies. Policyholders can use whole life as a vehicle to achieve their long-range financial goals. Usually, these policies come with a guaranteed cash value that the insured can tap into later to fulfill temporary cash needs or handle emergencies.
Whole Life Features
Whole life insurance has several features that make it different from basic policies. Consider the following features before you shop for whole life insurance quotes:
- Premiums are unchanging and payable for the policyholder's life. Because whole life premiums are constant, the younger you are when you take out a policy, the lower your annual premiums will be. In other words, the whole life insurance quotes that you receive will reflect the premiums you will pay for the rest of your life. Some insurers also offer whole life policies with abbreviated payment periods (e.g., 15 years) or a one-time payment.
- Guaranteed cash values. In contrast with term policies that do not earn any cash value, a portion of the money you put into your whole life policy grows as guaranteed cash value. If you decide to cancel the policy or if your policy is terminated, the cash value still belongs to you. And, as long as the policy is active, you can borrow against this cash value with a policy loan. The loan will be subject to your insurer's current interest rate on policy loans. Borrowing from your policy will lower the cash value and the death benefit. The amount of your policy's guaranteed cash value will depend on the type of whole life insurance you purchase, how long you've had the policy, and its benefit amount. As you shop for whole life insurance quotes, remember that the cash value growth of these policies is tax deferred, meaning you will not pay income tax on the money until you withdraw it.
- Dividends. Whole life policies have the ability to earn dividends. Policyholders receive dividends when the true costs of the policy end up being less than the insurer expected when determining the premiums. When this occurs, your insurer might return part of your premiums to you as a dividend. Remember that dividends are not a sure thing because insurers cannot predict their actual costs in advance.
