How to Explain Whole Life Insurance

Whole life insurance, also called "cash-value" insurance, is a basic and consistent type of permanent life insurance that stays in effect for your whole life at a level premium. This life insurance is a good choice if you don't think your need for it will change over time. A portion of your premium goes into a reserve fund called "cash value," which grows over the years that your policy is in effect. Your reserve fund is not taxed until you take it out, and you can borrow against it.

Most of the time, the premiums must stay the same over the life of the policy and must be paid regularly based on the amount written in the policy. You may also be able to pay all of the premiums at once with a single lump sum. This is called a "single premium." When you turn 100, your cash values will have grown to the same amount as the death benefit.

But whole life insurance is very expensive, and if you're on a tight budget, you might not be able to afford all the insurance coverage you really need. But on the plus side, the death

As long as the premiums are paid, the benefit will be paid. Also, if you don't borrow against the death benefit, it will never go down.

The returns on a whole life insurance policy will change with the market and usually follow returns.

available from other investments, such as mutual funds that invest in stocks. But if you cancel your policy, you can get your cash value in cash or as paid-up insurance.

You should get whole life insurance if you want to:

1. Pay final expenses,
2. Pay for a buy-sell agreement for a business,
3. Use it to save money on taxes and plan your estate,
4. Give money to a charity you like,
5. Save money for a child's college or your own retirement,
6. Give protection to key people.

Before you buy whole life insurance, you should think carefully about what level of coverage you want.

coverage. Too often, people make the mistake of not covering enough or, even worse, not having enough money.

overstepping their limits. This would be a terrible mistake with a whole life insurance policy,

If you don't pay your premiums, your policy could be cancelled and you could lose all of your money. So pay attention and make sure you:

1. Pick the one that gives you the most money in the first year,
2. Think about "participating" in insurance policies that can pay dividends. This will increase the value of your policy by increasing both the cash value and the death benefits.
3. Choose a life insurance policy with a guaranteed cash value from the first year on.

Don't buy an insurance policy that has "surrender charges" if you want to cancel it.