What is Whole Life Insurance ?

As explained, having an insurance is highly necessary for our personal financial planning. By having an insurance, it mean we are transferring our loss or risks to other party which is insurance company. Such as a life insurance. Some people says that life insurance is the basic type of insurance that must-have. Life insurance, both whole life insurance and term life insurance, is a self protection that provide various kind of products and protection, from illness to die.

While term life insurance covers in ranging of periods, whole life insurance could cover entire life. Whole life insurance, also known as “cash-value” insurance is a basic and consistent type of permanent life insurance which remains in effect your entire life at a level premium. This life insurance is a good choice of you if you do not expect your life insurance needs to diminish over time. A portion of your premium goes into a reserve fund called ‘cash value’ that builds up over the years your policy is in affect. Your reserve fund is tax-deferred and you can borrow against it, until you withdraw it.

Whole life insurance policy's returns will fluctuate with the markets and will usually follow returns available from other investments like equity mutual funds. However, if you decide to quit your policy, your cash value can be paid in cash or paid-up insurance.

The premiums must generally remain constant over the life of the policy and must be paid periodically according to the amount indicated in the policy. You may also have the option of a single premium ----- paying all of the premiums at once with a single lump sum. Your cash values will grow to equal the amount of the death benefit when you turn to age 100.

Although, whole life insurance is very expensive, and if you're on a limited budget, you may not be able to afford all the insurance coverage you actually need. But the plus point is that the death benefit is guaranteed as long as premiums are met. Also death benefit will never decrease if you don't borrow against it.

Whole life insurance is most suitable for your personal financial planning, if you want to:
• use it as a tax and estate planning vehicle,
• pay final expenses,
• accumulate cash value for a child's education or retirement,
• fund a business buy/sell agreement,
• provide key person protection.
• provide money for a favorite charity,

Before buying the whole life insurance, you need to think carefully about choosing your level of coverage. Too often people make the mistake of insufficiently covering or even worse, financially overextending themselves. This would be a tragic error with whole life insurance policy because defaulting on premium payments can mean policy cancellation and the loss of your entire investment.

So be careful and make sure you:
• pick a life insurance policy that has a guaranteed cash value starting at the very first year,
• choose the one with the highest cash value in the very first year,
• consider "participating" insurance policies which can pay dividends, increasing your policy's value by boosting both the total cash value and the death benefits,
• beware of any insurance policy that levies "surrender charges" when you cancel.
• if you ever need to stop paying premiums, your policy lets you use the accumulated cash value of the life insurance policy to pay the premiums, thus keeping your coverage current.

A reputation of a insurance company could be a good point of your consideration when you already decide to take a whole life insurance. Your personal financial planning also should keep in balance when decide to take this type of insurance. Due to its high price, we should pay attention to other of our financial obligation or installment that have to pay at the same time.

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