If you've decided that whole life insurance is the right choice for you, you should know both its pros and cons.
Term life insurance only covers you for a certain number of years. Whole life insurance, on the other hand, covers you for your whole life. But with that extra coverage come extra costs. Isn't that how things usually go? When you buy whole life insurance, you pay not only for the cost of the insurance, but also for the cost of investing. Some people have called the investment costs "forced savings," and it's true that some people think there are better ways to save for retirement. As you get older, the price of insurance goes up and the price of investing goes down. If you decide to cash in your whole life insurance policy, you may get cash or paid-up insurance. But it's hard to know how much you'll make because of commission fees, changes in the market, and made-up numbers that agents use to show how things work.
Still, many wealthy people choose to buy whole life insurance policies, and for good reason. Whole life insurance helps them plan their estates. By setting up an insurance trust with whole life insurance, they can make sure that their estate taxes are paid with the money from their insurance policy. This is good because estate taxes would have to be paid out of pocket otherwise.
When you know more about whole life insurance, it might not seem as safe as its name makes it sound. Yes, you will be covered for life, but there are extra costs for coverage that some people do not need. If you have enough money to invest in whole life insurance, you won't be wasting money by setting up an insurance trust.
