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Life InsuranceWhat's Right For You?
A Whole Life policy provides you with both an insurancecomponent and savings component called cash values; which means you have insurance protection in the event of your death andaccumulates cash over time should you live. You pay one premium for the total insurance policy, with part of the premium used to pay for the insurance coverage and the remaining part of the premium used toward your investment savings. This savings portion of the policy is invested in one or more investment vehicles (mortgages, stocks, bonds, mutual funds, etc.) that the insurance company select and the investments chosen will generally provide a better rate of return than you would get from a bank’s savings account and the cash value of your policy can usually be accessed if you need money. You will find that Whole Life policies are ideally suited to cover long-term needs, because the coverage continues for the rest of your life or to age 100. You won't need to renew your policy periodically, nor will you need to provide proof of insurability once the policy is in place. Your premium also does not increase (level premium), so you won't have to worry about the rising costs of insurance as you get older or your health deteriorates. In addition to the protection, you can rest assured that in most cases your premiums will never exceed your returns. In the earlier years your cash values will not reflect this, as there are certain items such as reserves that must be established at the onset of a policy. As well as administrative and commission expenses which are higher in the earlier years. But in a few years your cash value will begin to grow and with the help of compound interest continues to grow. The growth of your cash values are based on the investment choices of the company but even if the investment returns of the company are not that great, you will still make money on your money as most insurance companies guarantee that it will credit a minimum amount of interest to your cash values. Insurance that lacks the cash value feature, such as term insurance, doesn't offer such investment opportunities. You can also withdraw portions of your policy ‘s cash value. Awithdrawal of cash value is similar to a withdrawal from a bank savings account and almost as easy to make. As long as you maintain enough cash value in the policy, you can make withdrawals and still keep the life insurance protection in effect at your desired coverage level. You can also take loans against your policy using the accumulated cash value as collateral. The interest rate is determined in advance and is often lower than the rates banks offer. If you die before the loan is repaid, however, the death benefit proceeds will generally be reduced by the amount of the outstanding balance. Finally, because of its unique savings element, whole life insurance can be put to other uses. You can, in fact, use it as much as you would use your other investments. The expected growth of your cash value makes this type of insurance a good way to save for major financial goals such as:-
"Nothing is more powerful for your future than being a gatherer of good ideas and information. That's called doing your homework. Do as much research as you can because nothing beats being prepared." - Glenn Copyright © 2001 - 2009 - Glenn S. Ferguson
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