Global Courant
Life insurance is the simplest form of permanent life insurance. It offers lifetime protection with guaranteed premiums, an end benefit and a cash value element. A lifetime policy is in effect for the rest of your life, unless you cancel the policy.
The benefits of whole life insurance include guaranteed death benefits, guaranteed cash values, and a fixed, predictable annual premium. This is aside from mortality and expense benefits which will not diminish the cash value of the policy. To be clear, there is a downside to having a lifetime policy. The premiums are fairly inflexible and the fact that returns may not be competitive with other savings alternatives. Riders are available to offset this, increasing the death benefit, but an additional premium must be paid.
A lifetime policy is a way to build wealth, as regular premiums pay for insurance costs and contribute to the growth of equity. This means building an account where interest is allowed to accrue, tax deferred.
Whole life is a coverage option best suited for a specific type of investor. Anyone with a stable income and long-term financial and investment goals is a great candidate for this type of life insurance policy. Due to the level premiums, you do not pay more as you get older. And since cash value grows over time, the funds you put into a policy are guaranteed to your family and beneficiaries.
This guaranteed value can help in several ways during the term of your cover. For example, if you have an urgent family situation or temporarily need extra money, you can take money out of your policy to meet those needs and stay on track.
This type of policy is a lifetime investment, in that the benefits begin upon enrollment and continue for the rest of your life. It’s a safe feeling to know that the benefit will always be there for your family with this type of policy, and the ability to borrow against your policy at current rates gives you a lot of financial flexibility. The initial contributions you make to this insurance plan are not tax protected, but once the money is in a policy, its growth is tax deferred under current law. You could compare it to other types of investments – bonds, market instruments or stocks.
The three most common types of life insurance are regular life insurance, short-term and variable. With any type of life insurance, you can lock in the same monthly payment for the life of the policy. Life is not for everyone. In some cases it can be considered expensive. You not only pay for the insurance part, but you also make an investment. But the combined functions of this one financial instrument mean more power for you. That extra cost could be worth it if the policy fits your needs. Insurance agents like to refer to these policies as retirement plans, emphasizing the “forced savings plan” inherent in investing the premiums monthly for retirement.
Whether you are looking to provide security for your family in the event of your death, or to secure your own retirement, whole life insurance makes sense by combining term life insurance with an element of investment. In short, life insurance is peace of mind.
What is life insurance? – Your guide to all life
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