What are the characteristics of whole life insurance? First, you need to understand what whole life insurance is. This type of insurance provides coverage for the named person from the time someone opens the policy until the death of the insured person. The premiums paid on the policy help build the value of the policy. Some policies have an expiration date that the policy can pay out if the insured person is not deceased by that time. The date is often the 100th birthday of the insured person. The premium remains the same throughout the life of the policy until redemption.
A feature of this type of life insurance is its cash value. Part of each premium goes towards building the cash value of the policy. The policy pays at the death or 100th birthday of the insured party at that value. Most whole life insurance policies offer the option of borrowing against that cash value. This is a great feature for those who have financial problems and need a little help. You can repay the loans at a fair interest rate. That will restore the cash value of the policy. However, if the loan remains unpaid, the loan amount plus interest will be deducted from the settlement amount when the policyholder dies. What is left over will go to the beneficiaries of the policy.
Another feature is constant premiums. With term life insurance, you can also get consistent premiums over the term. However, if you want to renew the policy after the term expires, the insurance company will likely increase the premium levels significantly. With whole life, the premiums are the same from the time the policy is taken out until the death of the insured. The number may seem large at first, but over the years, the premium will become extremely affordable as the price of other things continues to rise.
Another of the significant characteristics of whole life insurance is the tax benefits that it grants to the insured and to the beneficiaries. The insured person does not pay taxes on the accumulated cash value of the insurance policy. After the insured person dies, their beneficiary can receive the proceeds from the insurance policy without incurring income taxes in most circumstances. Whole life policies make up the majority of insurance policies sold in the United States. They offer protection for the loved ones of the named insured in the event the individual dies at any age.
