What is whole life insurance?
Whole life insurance is, to my way of thinking, the purest form of life insurance. Whole life insurance doesn’t have a set time frame limitation, such as term life insurance does. You don’t have to worry about your policy expiring before you do, you just keep paying it every month, and it keeps on covering you.
With a whole life insurance policy, your coverage never ends. You can also pay more than the premium every month, and the extra will be applied to the ‘cash value’ of your policy. The ‘cash value’ of your policy is like your own personal financial institute. It grows, and you can borrow against it. But since it’s your money, you never have to pay back the principle if you don’t want to. You will have to pay interest on the borrowed amount, as per federal law, but the interest is only a few points per year, far lower than a traditional loan, and you can easily pay that and keep the money you ‘borrowed’ from yourself.
If you don’t borrow out your full cash value, and you should happen to die, the extra cash value on the policy is applied towards your death benefits. Your death benefits also increase every month as you make your regular payments. If you purchase a $150,000 policy when you’re 21 and you continually pay more than the minimum payments every year, and you live until you’re 76, your policy would be worth far more than $150,000. If you were paying just $200 a month into the policy, your death benefit would be over $1,000,000. That’s why whole life insurance is so much better than term life insurance. And it never expires, you just keep paying on it until you’re dead, then your beneficiary gets the money they need to pay off all your debts and bury you.
Whole life insurance policies often have options for cashing out your policy, in the event of being diagnosed with a terminal illness, which typically are not allowed under term life plans. Whole life insurance policies that allow for the terminal illness cash out normally will pay direct to you 90% of the current death benefit of your policy. This is good for everyone, because the insurance company saves 10% that they know they’ll be paying out shortly, and you get some money immediately which might be just what you’d need in order to afford some more treatments that may help you live longer, in less pain, or just plain feel better about what you’re doing.
I strongly believe that whole life insurance is the way to go for any of your life insurance needs. I have yet to see a term policy that offers anywhere near the benefits of a whole life policy.