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According to LIMRA, as many as 132 million Americans rely on life insurance to protect their financial security. However, 30% of Americans know they need more life insurance. That’s more than 70 million people! So, why aren’t individuals purchasing the coverage that they need? Many consumers feel that life insurance, in general, is very expensive and confusing, and while this can be true, it’s important to educate yourself on the different types of coverage that are available and know what policy is right for you so that you aren’t paying for unnecessary benefits.
Let’s start with the basics. There are two main categories of life insurance--term and permanent. Within each of these types, there are a variety of different policies, from level and decreasing term to whole, universal, and variable life options--and the list doesn’t end there! So, it’s understandable that life insurance could be overwhelming and confusing when there are so many options. One of the oldest and most common policy type is whole life which is also a type of permanent insurance.
As its name suggests, a whole life policy covers you for your whole life, as long as you continue to pay the premiums. A portion of the money put toward the policy builds up a cash value component within the policy that may allow the policyholder to access funds in the future on a tax favorable basis. Should the insured pass away, a death benefit is paid to the beneficiary of the policy. Like all life insurance policies, a whole life policy can provide income to your loved ones who have been dependent on you.
Permanent insurance tends to initially be higher in price than term coverage but there are pros to paying a higher premium. First of all, whole life policies accumulate cash value as explained earlier; this allows the policyholder to borrow against the policy for any reason. This money can be used for retirement or go toward education costs. Another benefit is that the premium amount usually never changes on a whole life policy. It will remain the same for your entire life, unlike a level term insurance policy that will only remain level for a specified period of time, then increases annually thereafter if you want to maintain the coverage.
Life insurance should be part of your family’s financial planning. These two topics go hand in hand when you are considering ways to provide you and your loved ones financial security for the future including your retirement years. A whole life policy is a viable option for anyone looking to save money for their future and invest long term. Like other insurance types, an ideal time to purchase permanent insurance is when you’re young and healthy to help you lock in lower rates. As you age, permanent insurance is still a great option and can be used toward estate planning or to set up a family trust.
A whole life policy may or may not be the best option for you and your particular needs, but it is something that everyone should understand should the time come when it does fit what you’re looking for in a life insurance policy. A whole life insurance policy can help protect your family's financial future while allowing you to enjoy the benefits of a fixed-rate life insurance policy. Speak with a licensed insurance agent to see what type of policy is the perfect fit for you!
Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the American Bankers Insurance Association, and co-chair for their Government Relations Committee. In addition she is chair of LIMRA’s Strategic Marketing Issues Committee.
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