Similar to term insurance policy, whole life insurance policy commits to the payment of specific amount of money to the beneficiary upon the death of the policy holder. The whole life insurance policy is committed not committed to a set period of time rather it pays the benefits as long as the premiums have been paid.
Once an individual takes whole life coverage, it can neither be revoked nor reduced or cancelled. However, in case of frauds and non-payment this condition does not hold. The primary advantages include:
- Lifelong protection – it is not subjected to expiration nor there is decrease in the value.
- Level premiums – the policy rate that is being paid will never increase
- Cash value – cash value is built over a portion of premiums and this cash value can be borrowed against.
- Guaranteed death benefit – there is a guarantee that the beneficiary will receive the amount.
The decision to buy whole life insurance rather than any other is a personal choice and depends on the finances, age, and coverage goals. The first part in the decision making process when it comes to adopting any type of insurance policy is cost. The cost of whole life policies are significantly more than several other type for the same coverage amount. Even though the cost stagnant level is guaranteed but the main concern is to have adequate amount of coverage when required.
The process of deciding whether or not to go for a whole life policy starts with determining the needs of life insurance. Several life insurance calculators are also available over the internet. The American Institute of Certified Public Accountants 360 Degrees of Financial Literacy website provides an individual to calculate via Life Insurance Calculator. This phenomena help in determination of the required coverage.
If compared to term coverage, the cost of whole life coverage is approximately six to eight times higher. This leads to a prominent issue faced by many insurance companies. Cost is a crucial and considerable factor in purchasing a whole life insurance but if should not be the deciding factor.
If need and cost are balanced wisely, getting a mixture of term and whole life policy may be a suitable solution.
Reviewing the cited literature of ‘Life Insurance Settlement Association’ reveals the fact that overreaching personal budgets is a major reason of individuals surrendering their policies or allowing them to lapse. As long as the whole life insurance policy is kept, the individual opting for the policy is at benefit at the right time and in the right circumstances, the benefits that are provided by whole life insurance policy outweighs the added cost.
Before making any decision over whether or not to purchase whole life insurance policy, and further deciding how much to spend over it, should be made keeping in view the future of both; the financial and physical health of the individual opting for it. If a certain life insurance cannot turn out to be helpful when required, purchasing it will turn out to be a wastage.