What is Whole Life Insurance?
Definition.
Whole Life Insurance is a type of insurance meant to cover you for your WHOLE life. It is also called permanent life insurance. It provides permanent death benefit coverage for the life of the insured.
What are the Benefits of Whole Life Insurance?
Premiums are fixed and will never go up, regardless of market conditions.
There may be cash value, which will allow you to withdraw funds or take out a loan while staying covered.
The death benefit is guaranteed as long as the premiums are paid.
The death benefit may also be tax free to your beneficiaries.
What are the Cons of Whole Life Insurance?
It is generally a more expensive type of life insurance because it does cover your entire life.
Fees could be charged on the invested portion of your premiums.
How does it work?
Once you decide that a whole life insurance policy is right for you, shopping the best insurance company would be next on your to do list. You want a company that has competitive prices and is backed with a good financial strength rating.
Life insurance companies usually show their financial strength ratings on their websites, or you can ask the agent you are working with for the rating.
Next, you fill out an application including any and all medical history. This will include prescription drugs, previous illnesses, current illnesses, family history and much more. After that, a paramed will be scheduled for you. This is a brief medical check-up that can usually be done at your home. It generally requires weight, height, blood pressure, blood and urine samples. Then, all of the results will be sent to an underwriter. An underwriter is a person that underwrites an insurance risk. They determine how healthy you are for your age and what rating that particular insurance company will give you. Based on your rating, the insurance company will tell you how much your premiums will be for your lifetime for the specified death benefit that you want. As soon as you accept the policy and pay your first premium, your policy will be in force. Both you and the insurance company have now entered into an agreement that you will pay these premiums for the remainder of your life and at your death, the insurance company will pay out the death benefit to your beneficiaries. As long as the premium stays up to date, then the policy will never lapse.
There are additional riders that may be added to certain policies, and there are some premium options to have a paid up life policy or a single premium life policy. All of these options can be discussed with your agent.
