Whole Life Insurance Policy

Whole Life Insurance Policy: What They Did Not Tell You

What is Whole Life Insurance?

Whole life insurance is when your life insurance policy will cover you for your entire life, not just during a specific time like term life insurance. Your death benefit and premium will remain the same, for the most part (according to company, of course). One of the main things that you may not have known about whole life insurance is that there are three different types- traditional, interest sensitive, and single premium, all of which you can choose from. You also probably did not know that you have no say so about where your money goes, and what the biggest downfall to whole life insurance is.

Traditional, Interest Sensitive, and Single Premium

Traditional whole life insurance is when you are given a certain minimum rate of cash return on the amount of money that you decide to pay. Interest sensitive whole life insurance is when you are given a variable rate of cash return on the amount of money that you pay. It is most comparable to an adjustable mortgage rate because it can change at any time. One of the benefits to interest sensitive whole life insurance is that you will be given a higher amount of flexibility. For example, you can add a higher amount of money that your dependents are going to receive for your death benefit. Unlike with most types of life insurance, with interest sensitive life insurance, you may not need to pay an extra amount on your premium in order to ensure that your dependents will get this extra money. At the same time, whether or not you will actually not need to pay for this depends on several factors. One of these factors includes how well the economy is doing at the time. It also will depend on what the rate on your cash return is. Single premium whole life insurance policies are for people who have a large amount of money and are able to purchase their policy up front. All whole life insurances are beneficial because they will shelter your money from taxes.

How Your Money Will be Invested

One the biggest disadvantages of whole life insurance policies is that you have no control over what your money will be invested in. You are not allowed to choose whether you want to invest your money in stocks, bonds, or any other types of investments. The insurance company that you have your whole life insurance policy with will have complete control over how and where your money will be invested.

The Biggest Con

The one thing that most people hate the most about whole life insurance policies is that they offer you no premium flexibility. You will also not get any face amount flexibility. What this means is that the plan that you buy is the plan that you are going to need to continue paying for and using for life. It is so important for you to make sure that you find the plan that you are going to be completely satisfied with because you will not get to “change” your mind later on without breaking your contract.