Whole Life Insurance
Whole Life Insurance is a type of life insurance contract that provides for insurance coverage of the contract holder for his or her entire life. Unlike term life insurance, which covers the contract holder until a specified age limit, a traditional whole life policy never runs out. On the inevitable death of the contract holder, the insurance payout is made to the contract's beneficiaries. These policies also include an investment component, which accumulates a cash value that the policyholder can withdraw or borrow against.
Cash value is an amount of money that you are guaranteed to receive in the event of policy cancellation. Your premiums are invested on behalf of the policy, generating the build-up of the cash value. Over time, your premiums grow like any other investment and the rate or return (yield) can vary from company to company. You also have the right to borrow against the accumulated cash value for whatever reason you choose - to make purchases, cover expenses or even for paying the premium itself.
When you first take out the policy, premiums may be higher than you would pay initially for the same amount of term insurance, but over a longer period of time they will total less than the premiums you will eventually pay if you were to renew a term policy continually in your later years.
Whole life is suitable for long-term obligations, such as surviving spouse lifetime income needs, estate liquidity, death taxes, funding retirement needs, etc., and it also provides a good basis for complete protection based investment portfolio.
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