Buying Whole Life Insurance

buying whole life insuranceWhole life insurance is a financial product that provides a death benefit when the policyholder passes away. Unlike term life insurance, that only provides coverage for set period of time, whole life insurance provides coverage for life. In the most basic terms, whole life insurance works by charging the policy holder a premium (price) that is paid over time in return for the death benefit. In addition to the death benefit, many whole life insurance policies build cash value that can be taken out of the policy and used for a number of purposes. Many insurance companies also allow policyholders to borrow against the value of a whole life insurance policy.

Whole life insurance is a good choice for those who want to provide for his or her family after death. For example, a person who will likely pass away while still owing a mortgage, with other significant debt or without retirement savings can plan on his or her spouse or other beneficiary to use the money from the insurance policy to cover these expenses.

For those who are in a high tax bracket or who are otherwise seeking a tax advantaged investment, should consider a whole life insurance policy. This is due to the investment portion of the policy growing in a tax advantaged manner. In addition, many insurance companies pay an annual dividend to policyholders. The dividend is considered a return of premium and is not taxable income. A policyholder can choose to use the dividend to pay toward the insurance premium, keep it in the cash value portion of the policy or simply take the money as cash.

The life insurance market is a competitive one. This competition, along with longer average life spans, has worked to reduce the cost of life insurance policies in recent years. A person who is interested in obtaining a whole life insurance policy should get a few whole life insurance quotes online and compare the premium cost for similar plans among different insurance companies. A person who spends a little time comparing policies from the companies with the best ratings can often save a significant amount of money.