In your living years, you may work hard to amass great wealth that can be used in your retirement years and that can hopefully be passed on to your surviving dependents when you pass. However, the unfortunate reality is that many individuals reach their demise well before they had planned. They may not have the ideal amount of wealth amassed to fully support their dependents as desired. The result is that dependents, such as a surviving spouse and children, may not have access to the income or capital necessary to support their lifestyle. They may have to drastically adjust to a much less comfortable lifestyle as a result.
Whole life insurance is one option that many people use to protect their loved ones from this possibility. The reality is that you simply cannot predict when death will occur, and you need to be prepared for all possible scenarios. With a closer look at what whole life insurance is, you will be able to better determine if this is the right solution for you and your family.
Understanding What Whole Life Insurance Is
There are two primary types of life insurance available, and these are term and whole life. With a term policy, the life insurance remains in place for a fixed term. This may commonly be for 15, 20 or 30 years. When the end of the term is reached, the life insurance benefits simply vanish. With a whole life policy, there is no term. Provided you continue to pay the premium for your coverage, the benefits will remain in place throughout your life. Furthermore, many whole life policies will accrue cash value. You may be able to borrow against the policy or cash it out entirely when you reach a suitable financial position and no longer need access to life insurance coverage.
Who Benefits From a Whole Life Insurance Policy?
A whole life insurance policy is often a more expensive option than a term life policy, but it offers clear benefits. For example, you never have to worry about coverage running out. Furthermore, because it accumulates cash value, it is a true financial asset. Many people who are interested in a comprehensive life insurance policy will benefit from this type of coverage.
Exploring the Whole Life Insurance Options
There are multiple types of whole life insurance coverage for you to explore in greater detail. With a standard whole life insurance policy, your rate of return on the cash value stays the same. The death benefits and premium also remain the same. With a universal policy, you enjoy many of the same benefits as with a standard whole life policy. However, you have the flexibility to adjust premiums as desired based on your budget limitations and to adjust the amount of money you are contributing to the cash value account. An indexed universal life insurance policy gives you the ability to select from different indices to control how your cash value grows over time. This is similar to a variable life insurance policy, which allows you to create sub accounts for easier management. You can choose to invest money in different sub accounts in various ways, such as in CDs, stocks and more.
How to Budget for a Whole Life Insurance Premium
Because a whole life insurance policy is a more expensive option to consider, some budgeting may be in order. As a good rule of thumb, you should first determine your coverage needs before shopping for a policy. This is because it is most important that your policy meet you and your family’s needs with regards to death benefits. Then, you can obtain quotes from different insurers for the type of whole life insurance you desire. It may be wise to set up automated payments so that you can ensure that your policy stays active over time.
Preparing for the end of life is rarely easy to do. It requires you to think about unpleasant and even painful concepts and to plan for your loved one’s lives without you. The good news is that life insurance is available to make your planning efforts easier. Take time to review your financial needs and different insurance options as you prepare for the future.