Whole Life Insurance

life insurance over 65What is whole life insurance? Whole life insurance is the most basic and consistent permanent life insurance policy you can buy. Under a whole life policy, the premium and death benefit you are quoted at your policy’s start remain the same throughout the policy’s life. But because your insurer will be investing your premiums, the policy may also may accumulate a cash reserve (the “cash value”). These funds can be put to use as premiums, reinvested, or saved.

Two common twists on a whole life policy are “limited payment” whole life insurance and “interest sensitive” whole life insurance. Limited payment insurance is very similar to standard whole life insurance, only premium payments end when you turn 65. Coverage is still permanent. The total cost of coverage remains the same, but because payments are condensed into a shorter amount of time, the monthly premium will be higher.

Interest sensitive whole life insurance sets the death benefit and premiums permanently, but the cash value fluctuates in accordance with interest rates. The insurance company usually guarantees a minimum your cash value can be reduced to even if the interest rates would make your investments worth less, but make sure you verify this with your insurance company.

You need to think carefully about choosing your level of coverage when it comes to whole life insurance. Too often consumers make the mistake of inadequately covering, or, even worse, financially overextending themselves. With a whole policy this would be a tragic error, because defaulting on premium payments can mean policy cancellation and the loss of your entire investment. This is why it is crucial to assess your needs and confer with an insurance professional before you commit to a plan.

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