Whole Life Insurance

"Whole” Life Insurance is more suited for those with long term goals in mind. Whole Life policies are generally more expensive with the benefit payout usually smaller than term insurance but the coverage is “permanent”, the premium is set for the life of the policy and won’t increase.

Cash values accrue while life policies and can be used for loan options or used to make monthly payments for you when your policy becomes “paid up” at a certain age. The amount of cash value can be minimal and take awhile to build up. In the event you borrow against your policy for a loan, any amount borrowed from the policy must be paid back or will be deducted from the beneficiary’s payout benefit. Once values build up, as long as the policy is in force, you may borrow against the policy cash value at the current policy interest rate which may or may not be better than another lender.

For this reason, whole life cash value is used as a last resort in many cases when used for loan purposes. If you choose to surrender the policy, there are options from various companies to give you back guaranteed cash values. The amount of your guaranteed cash value depends on the kind of whole life policy you have, its size and how long you have had it. The growth in cash values is tax deferred under current federal income tax law. Borrowed amounts reduce the death benefit and cash surrender value.

Due to the expense of these policies, this type of plan is more sought by and more feasible for the average “middle age” individual who has most likely paid off many “starting out” debts and has freed up more monthly funds. In most cases, a large payout isn’t as necessary to replace income, protect assets or pay for a child's college fund should one pass.
This higher costing, lower payout plan can be the right fit for someone who is planning for future retirement years when a fixed income and inflation could be a concern. As one ages, medical issues can also be a concern. Passing medical question when purchasing the policy, then eliminating the issue from ever being a concern for the life of the policy, can be appealing.