Life insurance has a lot of variations targeted at providing efficient covers to protect loved ones when a person passes on.
One of the most common variations of life insurance is whole life insurance and this article gives a detailed explanation of the benefits of whole life insurance coverage.
What are the benefits of whole life insurance coverage? Why is it important to get whole life insurance coverage?
I will be answering these questions in this article in a short while.
Whole life insurance is one of the best forms of permanent life insurance. The term permanent life insurance was coined out due to the nature of the time duration of the whole life insurance policy.
Coverage under whole life does not have an expiry date. It is valid as long as the insured continues to pay premiums.
To understand the concept of coverage expiry in life insurance, I will have to explain term life insurance, another popular variation of life insurance.
In term life insurance, you choose what is called a term, a stipulated period when the life insurance coverage is supposed to be functional.
When the term expires and you are still alive, you will have to renew your insurance cover.
Renewing your term life insurance after it expires will cost more than it did before.
This is not the case with whole life insurance. There is no coverage expiry of this sort and the premium charge does not change.
As a recommendation, getting a whole life insurance policy is more cost-effective than term life insurance.
Before we go into the benefits of whole life insurance coverage, is whole life insurance worth it?
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Is Whole Life a Good Choice?
Whole life insurance comes with a death benefit and aside from that, it lets you build an asset for your loved ones.
This asset is often referred to as cash value and it grows as the years go by and can be used for life in a tax-advantaged form.
Now to the importance and benefits of whole life insurance coverage.
Benefits of Whole Life Insurance Coverage
I have detailed a couple of benefits that getting whole life insurance offers. They include:
Fixed Premium Rate
Whole life insurance has fixed premium rates that is the money you pay your insurance provider monthly does not go up.
The fixed nature of premiums paid in whole life insurance makes it seem very affordable than term life.
Term life insurance premiums are cheaper than whole life premiums in the early years. With time, having whole life insurance instead of term life will prove to be advantageous.
Additionally, when it comes to retiring, whole life insurance in your senior years will come at a fixed cost.
Possible Annual Dividends
Some mutual insurance companies provide annual payments of dividends on the whole life insurance policy.
These dividends are not always guaranteed as it is only a potential provided by certain mutual insurance companies.
If an insurance provider offers the payment of dividends, these dividends can be used to increase your policy’s cash value.
When you put back the dividends paid to you by the life insurance company, it helps you boost the growth of your whole life insurance cash value.
Furthermore, these dividends can be used to buy more insurance which increases the total death benefit that will be paid to beneficiaries of your life insurance.
So, you can use the dividends to increase your policy’s cash value or total death benefit.
If you do not want to use any of the options above, you can have your insurance provider pay you the dividends in cash.
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Fixed Claims For Beneficiaries
Life insurance is secured by someone for the benefit of others. With this insurance type, you can provide financial help for your loved ones after you are dead.
There is a guaranteed amount of money that should be paid in claims also called a death benefit.
As long as the life insurance policyholder pays their premiums, the family or chosen beneficiary is entitled to a death benefit.
A whole life insurance policy can be used to propagate any cause. You can use your policy to further the cause of charitable contributions.
When you enjoy high earning on your life insurance, you can give charitable donations which may entitle you to an income tax deduction.
Cash Value Growth Based on Tax-deferred Basis
Whole life insurance causes cash value to grow on a tax-deferred basis together with a tax-free sum that your loved ones will enjoy.
Interestingly, you can get a loan from the value of your policy and pay the money later or let it reduce the amount that would be given to beneficiaries.
Additionally, the money in your policy can be used to facilitate the expenses for your funeral.
One of the many concerns is retiring well. People in their senior years are always wondering what they can do to enjoy retirement benefits.
If your insurance cash value has grown sufficiently to a point, it can be used as part of your retirement financial package in a tax-advantaged manner.
The cash value funds are insulated by market fluctuations and are not affected by tax rates when the money is withdrawn.
Using this benefit will reduce the amount of money that would be made available for your loved ones or other beneficiaries.
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The benefits of whole life insurance coverage are quintessential for living. It is important to have an insurance cover that takes care of your family and loved ones even after you are gone.
You and your family and any beneficiary you choose to enjoy benefits from fixed premiums, claims, growing cash value, retirement benefits, and much more.
Opinion: if you want to have purchase life insurance, you should purchase whole life insurance particularly because of its fixed premium rate which makes it quite affordable.