Whole life insurance

There are many forms of life insurance coverage, one is whole life insurance, also known as permanent life insurance. It is designed to protect you for as long as you live. There are various types of whole life insurance including universal, variable, second to die, etc. Many companies have specific names for their products but, regardless of the name, it should clearly say it is a form of whole life insurance.

Whole life insurance is different from term insurance in several ways. First, whole life insurance lasts for as long as you live. Term insurance expires after a contractual amount of time. Whole life insurance adds the element of a tax-deferred savings account. Called "cash value", the savings account is tied to many factors relating to performance. These factors include, but are not limited to, investment performance, loss ratios, and company operating performance.

Supporters of whole life insurance say the cash value of a life insurance policy should compete well with other fixed income investments. Unlike a bond investment, you will get the added benefit of life insurance for your entire lifetime. Less than 5% of term insurance policies are every collected on. Term insurance premiums get more expensive as you get older. Eventually, the premiums become too expensive. Critics say you can do much better, over time, by purchasing term insurance and investing the difference in a stock mutual fund. The tax-deferred argument is not valid, critics say, because there are many other tax-deferred investments that offer a better return. The key to "buy term and invest the difference" is to stay disciplined and invest the difference every year.

Whole life insurance products also make projections that are likely to change over time. Life insurance agents and brokers will use illustrations to show the growth of life insurance and cash value. Make sure you analyze these illustrations carefully. The best way to determine the likelihood of these illustrations is to look at past company performance. If an illustration uses aggressive assumptions, make sure past performance supports these assumptions. If the company has a history of poor performance, its unlikely future results will be different.

Use one of the following rating agencies to research company stability and performance:

• AM Best
• Standard and Poor's
• Paul Weiss (Weiss Ratings)

These companies rate insurance companies independently and offer an unbiased view of each insurance company.

Also, get competitive quotes. Have agents from different companies get you quotes. You will make a more informed decision. Like many insurance products, whole life insurance has many policy options. Waiver of Premium, Cost of living adjustments, additional purchase option, and purchasing paid up insurance are several of the options available. Be sure to consider the impact each of these options will have on your annual premium.

Finally don't look for whole life insurance to set your investment portfolio on fire. Although life insurance agents may predict such excitement, permanent life insurance will be at the low end of the investment return spectrum. For some, who lack investment discipline or need fixed income in their portfolio, it is actually a decent investment. Make sure you can budget for whole life insurance for the long term and don't buy whole life insurance unless you can afford it.

Whole Life Insurance Quotes From Local Agents

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