Whole Life: Insurance that Lasts a Lifetime

In 2008, some 68 million Americans did not have life insurance, according to the Life and Health Insurance Foundation for Education. However, a life insurance policy is a must-have if you have loved ones who depend on your income. If you were to die today, an adequate life insurance plan will ensure that all your family’s financial needs will be covered, from the monthly mortgage and utility bills to your child’s college education.

If you already have a life insurance policy, good for you. You’ve taken an essential step in protecting your family. However, you may want to look closer at the type of life insurance coverage you own. Most Americans with life insurance only carry the group coverage offered by their employers, according to a 2008 LIMRA International study. Unfortunately, this type of coverage typically ends as soon as you leave that job or retire.

To ensure your family is covered well beyond your working years, you may want to consider permanent or “whole-life insurance.

Whole Life 101

While term insurance typically only covers you for 15 to 20 years, permanent or whole-life insurance remains in effect for your entire life as long as you keep paying premiums. For the first few years after you purchase a permanent life insurance policy, your premiums will probably be higher than the actual cost of insurance protection.

The policy can accrue cash value because you are contributing these excess premiums. (That’s why permanent life insurance is also known as cash-value insurance.) You can borrow against this cash value for several reasons, such as to pay off a mortgage, cover your child’s college tuition, or supplement your retirement income. Of course, these policy withdrawals or “loans” will reduce your policy’s cash value by the amount of your outstanding loan balance plus interest. You could even use your cash value as collateral for a business loan.

Generally, your premiums will remain level once a permanent policy is in force. This ensures continual protection for your family as you age, even if your health becomes poor. While whole life insurance commands an initial higher premium than term life, you won’t have to worry about re-applying every 10 or 20 years at a considerably higher rate as with term life.

A Personal Decision

While almost everyone needs some life insurance, it’s up to you to decide whether a permanent or term life policy is the best choice. It all depends on your specific needs and situation. If you are uncertain about what kind of life insurance policy you should purchase, talk to Brian Gruss.