Also known as permanent insurance, whole life is the most commonly sold life insurance in the United States. Compared to term life insurance, where the policy is only active for a specific period – usually 10, 20, or 30 years. Whole life insurance costs more money than term life insurance, but this is because the death benefit never expires – as long as the premium is paid – and it includes a cash value component that can earn interest and grow in value over time.
Advantages of whole life insurance include that it is permanent, predictable in that the beneficiaries know what amount of money they’ll receive, and includes tax benefits that defer any gains in interest. The savings portion can be borrowed against as a loan if needed. However, if you need to borrow against the loan, it is not without repercussions, including reducing the death benefit if it is not repaid before the policyholder passes.
While there are numerous benefits to whole life insurance, it does come with a few disadvantages. For starters, whole life insurance is costlier than term life insurance because it includes an investment component and covers your entire life. Second, the insurance company has control over the cash value of your account and can invest it how they choose, so savvy investors who repeatedly beat market returns may not appreciate the limited control they have of this portion of their life insurance account.
At Great Michigan Insurance in Marshall, MI, our friendly and knowledgeable team of insurance professionals is ready to help with your life insurance needs. Give us a call today to learn more information.