Whole Life Insurance Companies: What They Do Not Want You To Know

Why Whole Life Insurance?

There are good reasons why people opt for the Whole Life Insurance versus Term Life and other variants. One is because unlike Term Life which only covers you for a number of years, Whole Life covers you for the rest of your life. Plus, it usually comes with a fixed premium unless you specify otherwise (like, you upgrade it in a couple of years, etc., depends on the terms of your policy). Also, it comes with a cash value incentive. Cash value means that your payments accumulate a corresponding monetary value overtime, and is tax-exempt. If you need money, you can borrow a portion of your insurance cash value to use on whatever emergency you are having. In this sense, having a Whole Life Insurance works both as an insurance and as investment – you have some sort of savings account that you put fixed premiums/savings into, and when you need cash, you can dip into it.

What you need to know about Whole Life Insurance

Although the cash value option sounds really good for those unexpected financial emergencies that your policy does not cover you, there is a drawback that people often miss: cash value constitutes the benefit you will get in case something happens to you. What this means is that if you borrow your cash value and are not able to pay it back, the overall sum your beneficiaries will receive when you die will be smaller and your coverage will be lower. Or, if you take out the complete cash value, then your beneficiaries will receive nothing, and if something happens to you, you are no longer covered. So before you purchase a Whole Life Insurance, think about it first. You might be better off paying a smaller premium with Term Life and just put the difference into stocks or other investment. In the end, it all depends on your risk tolerance. Get the insurance product that will help you sleep soundly at night.