Information on the Whole Life Insurance Policy
Individuals may purchase either whole life or term life insurance. Term insurance has a defined period it is in effect, but whole life goes for as long as you pay the premiums. Understanding whole life insurance can help you determine if it is right for you.
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Identification
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According to the New York State Insurance Department, whole life insurance is designed to have the same monthly premium for the life of the insured, and it can also help build a tax-deferred retirement fund as an investment vehicle.
Considerations
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The Wall Street Journal points out that while whole life insurance does offer a savings option, the extremely high fees associated with a whole life policy make it a poor way to save for retirement.
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Dividends
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A participating whole life insurance insurance policy is one that pays dividends either monthly, quarterly or annually depending on the terms of the policy. Those dividends can be paid directly to you, or you can choose to apply them to your policy and lower your premiums, or you can allow them to stay in your account and continue to accrue interest.
Time Frame
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Ginger Applegarth, writing on MSN Money, suggests that the best way to determine if a whole life policy is for you is based on your investment schedule. If you plan on paying on your insurance for more than 20 years then you could see significant benefit from the investment portion of a whole life policy. If you will be getting insurance for less than 20 years, then term insurance may be best.
Cash Value
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It is possible to surrender your policy for its cash value, and even take out a loan against the cash value of a whole life policy. Ask your insurance agent for more information on the availability of the cash value of your whole life policy.
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References
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- Photo Credit Image by Flickr.com, courtesy of Jesse Millan
