What is Whole Life Insurance & How Does it Work?

Life insurance is a contract in which two parties, the insurer and the insured arrive at an agreement that the insurer will pay the insured’s beneficiaries in the event of the insured’s death provided the latter will pay insurance premiums for a period of time. One example on life insurance that falls on the investment classification is whole life insurance.

From the word being, whole life insurance covers the whole of an insured person’s life. Payment of death benefit is definite in the occurrence of the insured individual’s demise. It is totally different from term life insurance because term life insurance pays death benefit only when the insured dies within the term of coverage specified in the contract.

The principal advantage of this kind of life insurance is that the payment for insurance claims is certain. The insured’s beneficiaries will definitely get a payout anytime the insured dies. Individuals who normally would like to leave their families financial security upon their deaths most often opt to purchase a whole life insurance. This type of insurance can also be used to cover the policy payer’s debts through enjoinment with term insurance. This insurance policy is far more expensive than any other insurance like term life insurance because life insurance companies ensure that the beneficiaries of the insured will get an accumulated insurance payout in the occurrence of the insured’s death.

Maximum cover and balanced cover are the two types of cover for this insurance policy. Maximum cover gives a guarantee that the insured sum and payment premium will not raise for the first ten years of insurance. Only when the insurance plan is reviewed after that period would there be necessary payment premium increase. Balanced cover, on the other hand, aims to set symmetry between the life investments of the policy owner and the life insurance so that it may sustain the coverage of the later years of the insured.

The insurance payment premiums normally depend on the sum of the coverage, the person, sex, and age. Women will normally have lower insurance premiums since they have longer life spans than their male counterparts.

Whole life insurance is for individuals who need lifetime protection coverage. It is well-suited for people who want a higher level of safety that are offered by insurance policies. People who do not want their premiums to increase along with their ages normally choose this insurance over other types. This insurance is viewed more cost-effective than the term-life insurance because the benefit payout is certain and premium payments do not increase on a yearly basis. Other advantages of this insurance are the building up of cash value through certain dividends and the stability of insurance premiums regardless of mortality and expense charges discrepancies.

Whole life insurance is ideal for person’s having long-term goals because of the guarantee in cash value build up and the convenience of withdrawal in the event of emergencies. Nevertheless, the premiums paid for this type of insurance will always be more costly than term life insurance because of the certainty in benefit payout. The policy payer’s ability to pay these premiums will determine the accumulated death benefit to be received by beneficiaries.