The Benefits And Drawbacks Of Whole Life Insurance
Whole Life Insurance (also known as Permanent or Universal Life Insurance) lasts for your entire life and never expires.
Whole Life Insurance Basics
Like Term Insurance, Whole Life Insurance will pay your family or other beneficiaries a certain amount of money if you should die (known as a “death benefit”). In addition to a death benefit, Whole Life Insurance policies usually have a cash value (think of it like a savings account) that increases over time on a tax-deferred basis, which you can invest and borrow against. Loans taken out against the cash value of the policy are on a tax-free basis, but usually accumulate interest and reduce the death benefit.
Cashing Out A Whole Life Policy
Whole Life policies usually offer the ability to cash it in for the value amount, which grows over time. This can provide you with a chunk of cash when you need it, though you will no longer own the insurance.
Whole Life Policy Premiums
The premiums you pay are usually on an annual basis and stay the same for the duration of the insurance without any increases. While the premiums for Whole Life Insurance policies are higher than premiums for Term policies, the fact that Whole Life policies include savings and investment options may make this option more appealing.
For help figuring out how much life insurance you need, see our article How Much Life Insurance Do You Need?
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