The most important factor in choosing a whole life insurance policy is to “understand that the premium is not the ‘cost’ of a whole life insurance policy,” says Flagg.
Insurance companies may be competitive in one niche but not in another.
Rates will vary based on age, gender, health history, smoking status and coverage amount (called rate bands).
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You’ll typically have a choice of how to use your dividends. “Non-participating” whole life insurance policies do not pay a dividend and are offered by stock insurance companies.
“Participating” whole life insurance policies pay a dividend and are offered by mutual insurance companies. What are whole life insurance dividends?ĭividends are common on whole life insurance policies. Some policies offer a rider that will add the cash value to the face value for the death benefit, but expect to pay more for this feature. It’s important to know that whole life insurance has a guaranteed death benefit amount (the policy’s face value), but that amount does not include the cash value in the policy, no matter how much you’ve accumulated. You should also list contingent beneficiaries who will receive the payout if your primary beneficiaries are already deceased. When you buy a whole life policy, you’ll list a life insurance beneficiary (or multiple beneficiaries) who will receive the death benefit payout when you die. What are whole life insurance death benefits? Make sure you ask your insurance agent what living benefits are available before you buy the policy. The most common living benefits let you access your own death benefit money for long-term chronic illness or terminal illness (called an accelerated death benefit). Living benefits allow you to access money in your own death benefit while you’re still living, under specific circumstances. Whole life insurance policies generally offer living benefits. What are whole life insurance living benefits? So will a policy loan if it’s not paid back. Withdrawals will reduce the death benefit your beneficiaries will receive. You can choose to tap into your cash value by making a withdrawal, taking a life insurance policy loan or surrendering the policy. Because of slow growth, it can take a long time before the cash value surpasses what you’ve paid in premiums. The cash value account grows tax-deferred, based on a guaranteed rate of return that is typically low compared to other types of permanent life insurance. The remainder of the premium goes to paying internal policy expenses. What is whole life insurance cash value?Įach time you make a premium payment for a whole life insurance policy, part of that premium is put into a cash value account. Before buying a whole life insurance policy, understand its cash value, living benefits, death benefits and dividends. A whole life insurance policy remains in force for the rest of your life as long as you pay the premiums.
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