- Insurance

What Is Whole Life Insurance and Why Do You Need It?

Life insurance is a death benefit that is paid out upon the death of the insured. There are two main types; term life insurance and whole life insurance. Term life offers a death benefit to be paid out if the policy holder dies within a specific term that can typically range from 5-30 years. With relatively low premiums and optimal coverage amounts, it is a budget friendly choice of life insurance suitable for most families. But sometimes investors are looking for lifetime coverage. Whole life insurance is good for the insured’s lifetime, as long as premium payments are made, and has a cash value that can grow.

What Whole Life Insurance Is and Why You Need It

Whole life insurance is purchased for a lot of reasons. Some investors want to leave money as an inheritance to their beneficiaries while others may want to be sure funeral costs will be covered after their death. They are a relatively low risk tax sheltered investment vehicle. The average returns on these products are similar to those of bond products.

For those who are interested in having both a death benefit and a cash value investment component, whole life insurance might be for you. You would have the flexibility to tap into the cash balance of your whole life insurance policy before your death. Many policy holders have found it beneficial to use these polices to assist with potential estate tax issues, or to provide liquidity for a closely held business, or to care for a disabled dependent or child.

Whole life insurance is not for everybody as the premiums can be quite high. High-income earners who have already maxed out the 401K and IRA contributions may look to whole life insurance as additional retirement savings. However, they should not be used as a retirement vehicle unless all other options have been exhausted.

Whatever the reason, whole life insurance policies allow insured individuals to make fixed premium payments and typically guarantee returns on their money invested.

How to Get Whole Life Insurance

Obtaining whole life insurance does depend on a number of factors, such as age, medical history, and lifestyle choices such as alcohol, drug, or tobacco usage. It’s important to note that when applying for whole life insurance a medical evaluation will be necessary. Don’t get discouraged if you are turned down by an insurance company or two as there are many providers of life insurance who have differing qualifications for eligibility. It’s best to seek guidance from your insurance agent at Melton Mcfadden Insurance to determine the right insurance vehicle to fit your needs.

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