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What is whole life insurance?

© jajacks62 (Flickr) Joseph A. Wells
© jajacks62 (Flickr)
Why choose whole life insurance
The premiums that you pay do not change and part of the premiums you pay will go towards the cash value. In addition to that the cash value, tax is deferred. This money can pay off your whole policy within a few years. The coverage you get from a whole life policy is life long with no need for future medical examinations.

Types of whole life insurance policies
There are a variety of choices that you can choose from this type of insurance – the most popular choices are interest sensitive, single premium and traditional life policies.

An interest sensitive whole life policy provides you with a variable rate on the cash value which is not different from a variable rate mortgage. This type of policy is flexible because it allows you to increase the death benefit without necessarily raising premiums.

Single premium
Single premium is for individuals with large amounts of money and they want to buy a policy up front. This type of policy also builds tax deferred cash value. It is important to note that the names of these types of policies can differ from company to company.
Purchasing a whole life insurance policy
Hidden costs
Although whole life insurance premiums do not change, many insurance companies will not disclose the administration and the insurance costs involved. These costs are deducted from your investment portion without you realising it. They do not explain how the returns on your savings portion are calculated. You are also not in a position to decide or choose where the money can be invested.

Get professional help
The fact that different companies offer different types of whole life insurance policies requires you to seek professional help. Besides, there are a lot of technicalities involved when it comes to this type of policy. Tax and investment issues are subjects that need specialist advice.

You can consult professionals like life insurance specialists or accountants who can help you make the best decision. It is also important to do some research first before purchasing the product. You also need to compare quotes of different service providers.

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