What you Need to Know when Purchasing Insurance

Before purchasing life insurance, it's important that you understand what you are purchasing. Because whole life insurance is meant to be kept for your lifetime, you want to make sure that you are purchasing exactly what you need. These are some of the most frequently asked questions about whole life insurance.

Does Whole Life Insurance Cost More than Term?

It may look like whole life insurance costs more than term insurance, but that is only initially. Since cheap whole life insurance is meant to be kept for your whole life, your premiums do not increase, while people using term insurance will see their premiums go up. Additionally, if you purchase term life insurance and then developed health problems, you would be uninsurable at the end of the term. Whole life insurance also develops cash value, while term does not. The price of whole life insurance is reasonable when you consider the added benefits you receive.

What is the Cash Value and Face Amount of a Whole Life Policy

The cash value of a whole life insurance policy is what your insurance policy would be worth if you decided that you did not need insurance anymore and wanted do cash out of the policy. You would be paid the cash value of the policy once you surrendered the policy. You can also borrow against the cash value. The face amount of a whole life policy is the amount that would be paid to your beneficiaries if you died.

Do I Have to Pay Whole Life Insurance Premiums for my Whole Life?

In most cases, whole life insurance policies are paid for over your whole life. In many cases, if you live to be 100, your policy will be terminated and you will be paid the face value of your policy. Some whole life policies have different payment terms. You can purchase some whole life policies with a one-time payment. Other types of policies are available where you pay the premiums for a fixed period of time. These types of policies cost more initially, but allow you to have more income freed up when you are older and might have a lower income.

What is the Difference Between Whole Life and Term?

Whole life insurance is meant to be purchased for your whole life. It costs more initially, but the premiums do not go up if you are older or develop a chronic health condition. Whole life insurance also accrues a cash value that you can borrow against, or get back if you decide that you no longer need insurance. Term life is designed to be paid for over a shorter term. These policies are for people that expect to have sufficient investments saved up so that they will not need insurance at the end of the term. It does not develop a cash value, and cannot be borrowed against.