Learn More about this Quiz
Whole life insurance offers permanent financial protection for a policyholder's family. Unlike term life insurance, whole life doesn't expire or lose its value, so it provides protection for life. It is more expensive and may not be the best option for younger, budget-conscious families, but it is a good investment in your future for numerous reasons.
Unlike term life, a whole life policy builds a cash value over time, which the policyholder can then borrow against. You can even convert the policy's cash value into an annuity if needed, ensuring you and your family have a set income for life.
While not guaranteed, permanent life insurance policies can also offer annual dividends that pay out based on how much the insurance company earns each year. These dividends are not taxed as earnings, so you basically enjoy tax-free money on the house.
Life insurance can be a smart investment for many individuals. Unlike mutual funds and similar programs, your policy's cash value isn't subject to the whims of the economy. It isn't going to decrease with market losses like your retirement account
might, even in the event of a major recession. This can help provide your family with economic protections that ensure that money won't disappear unexpectedly.
More than that, after your policy accumulates a cash value, you won't be penalized for accessing the funds. Most retirement accounts will hit you with a tax or penalty fee for borrowing your own money, but this isn't the case with your life insurance. It's yours anytime you need it.
Also, the rate you pay for your whole life insurance policy won't ever change. Once you purchase your policy, you lock in that plan's rate for life. As long as you continue to make your premium payments, you won't lose that coverage or be required to pay more than you agreed upon. In fact, there are few instances, such as fraud, in which your policy can be canceled, ever.
One of the main reasons people choose a whole life policy is to provide their loved ones with a death benefit. This is a certain amount of tax-free money paid to the policyholder's beneficiaries, which can include a spouse or children.
With so many great reasons to invest in a whole life policy, maybe it's time to reevaluate your insurance needs. Consider switching from a temporary term policy to a more permanent plan to enjoy the additional financial perks and protections.