Whole life insurance is also known as life-long insurance, permanent or straight life insurance. In this, a buyer gives annual premiums for a very long period (in exchange for permanent protection for the dependants in case of the death of the policyholder. Whole life insurance has a very high initial premium cost, sometimes well above the actual price of the policy or insurance. However, as the mortality risk of the buyer increases with each passing year, the premium cost comes down. The initial high price is necessary to level out the premium throughout life, so that the insurance company can provide coverage for entire life. The expenses of the insured grow each passing year due to inflation and the rising health needs which accompany aging, and so the insurance company can provide protection for entire life as well as level out the premium cost if initial premiums are high. The logic behind lowering the premium later on is that the older a person gets, the more the mortality risk increases. The surplus premium cash becomes functional in the insureds account as an investment builder and accumulator. This is an ideal non-taxable income and money accumulator. The cash values or dividends accumulated are given back when the policy matures or on the death of the insured. Partial withdrawal and borrowing on the cash value can be done tax-free if the policy is a qualified one. Whole life insurance is both a cash value builder as well as a dividend builder. It works as effective liquid cash in times of need. Term life insurance is purely protection-oriented, and the money can be got back only if the insured dies within the specified period in the policy. Since life and death can never be predicted or forecast, whole life insurance is the best bet for most individuals who seek an assured future for their dependants. It is necessary to get lifetime insurance to cope with connectivity, market, health and inflation risks. However, one needs to be judicious while making a policy purchase, since it is a lifetime decision. The various factors that have to be taken into consideration are the amount of coverage needed, ability to afford the premiums, the reputation of the company, whether the specific policies address the requirements, hidden costs, the cancellation penalties and fees, etc. It is advisable to consult an expert and compare costs and policies of the various companies before making a decision. There are various variations of whole life insurance, like universal life insurance, variable life insurance, single purchase life insurance, survivorship life insurance and various other specialized life insurance types. |
