Owner/Insurance Broker, KM Health Insurance Services, Hazel Crest, Illinois
This is a good Question. A whole life policy can insure to age 100 as opposed to it being a 10-20-30 year TERM policy as an example. Whole life policies also will give the option to be borrowed against because they build cash value over time. Sometimes depending on age, whole life is a good option.
Whole life policies are well suited for needs that do not diminish over time. Some commonly found uses for whole life are:
Family protection: To provide funds to support a surviving spouse and/or minor children, particularly for individuals who start a family later in life; to pay final bills, such as medical or other estate expenses and federal and state death taxes.
Business planning: Whole life insurance is often used for many different business purposes, such as insuring key employees, in split-dollar insurance arrangements, and funding non-qualified deferred compensation plans. Business continuation planning often involves using whole life insurance as a source of funds for buy-sell agreements.
Accumulation needs: Some individuals will use the cash value feature of whole life as a way of accumulating funds for specific purposes, such as funding college education, or as a supplemental source of retirement income.
Charitable gifts: To provide funds for a gift to charity.
Whole life insurance, sometimes called permanent insurance, or ordinary life, is designed to stay in force throughout one’s lifetime. As long as the policy owner meets his or her obligations under the policy, the policy remains in force, regardless of any changes in health that may occur. Unlike term insurance, where premium payments generally increase, as the insured gets older (the chance of death increases with age), premiums for most whole life policies remain level. A portion of each premium payment is set aside to earn interest.
Over time, a whole life policy will develop cash values. The accumulated cash values form a reserve which enable the insurer to pay a policy’s full death benefit, while keeping premiums level. During life, many whole life policies have provisions to borrow a portion of the accumulated cash value. If a policy is terminated without the insured dying, there are various surrender options for the cash value available to a policy owner.
Steve Savant is a contributor to Back Room Technician, an Advisys Company
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Family protection: To provide funds to support a surviving spouse and/or minor children, particularly for individuals who start a family later in life; to pay final bills, such as medical or other estate expenses and federal and state death taxes.
Business planning: Whole life insurance is often used for many different business purposes, such as insuring key employees, in split-dollar insurance arrangements, and funding non-qualified deferred compensation plans. Business continuation planning often involves using whole life insurance as a source of funds for buy-sell agreements.
Accumulation needs: Some individuals will use the cash value feature of whole life as a way of accumulating funds for specific purposes, such as funding college education, or as a supplemental source of retirement income.
Charitable gifts: To provide funds for a gift to charity.
Whole life insurance, sometimes called permanent insurance, or ordinary life, is designed to stay in force throughout one’s lifetime. As long as the policy owner meets his or her obligations under the policy, the policy remains in force, regardless of any changes in health that may occur. Unlike term insurance, where premium payments generally increase, as the insured gets older (the chance of death increases with age), premiums for most whole life policies remain level. A portion of each premium payment is set aside to earn interest.
Over time, a whole life policy will develop cash values. The accumulated cash values form a reserve which enable the insurer to pay a policy’s full death benefit, while keeping premiums level. During life, many whole life policies have provisions to borrow a portion of the accumulated cash value. If a policy is terminated without the insured dying, there are various surrender options for the cash value available to a policy owner.
Steve Savant is a contributor to Back Room Technician, an Advisys Company