Definition of Whole Life Insurance

Although you probably already know that you need some sort of life insurance coverage, you might be feeling confused about the process of shopping for it. Many people are confused about the differences between whole life, term life, universal life insurance and burial insurance, and not understanding the differences between each type of policy can make it difficult to make the right decision.

Whole Life Insurance Definition

Whole life insurance refers to a life insurance policy that will provide you with coverage for the rest of your life. Once you sign up for one of these policies, you never have to worry about not being covered, even as you age or deal with health-related complications. As long as you pay your premiums, you will always have coverage.

This type of policy is also a bit different from other options because it builds up a cash value. As you pay in, you don’t just pay toward your death benefit coverage. Instead, your policy will have some sort of savings component. Basically, your insurance company will invest your money for you and provide you with a return. Although it can take a few years for one of these policies to mature, you can eventually borrow off of the cash value at a highly competitive interest rate.

Whole Life Insurance vs. Term Life Insurance

Whole life insurance and term life insurance are two of the most common and popular policies out there, so you could be wondering which is the best fit for you. Here are a few things to look at when comparing whole life insurance vs. term life insurance:

  • Whole life insurance provides you with coverage for the rest of your life. A term life insurance policy, however, only offers coverage for the length of the chosen term.
  • Term life insurance policies do not earn a cash value; instead, they are strictly worth the death benefit. You can look at a whole life policy as an investment, however, because it does build up a cash value.
  • Term life insurance is often cheaper than whole life insurance, but this does depend on the type of policy that you choose, your health and other factors.
  • If you want to maintain your term life policy after it expires, you may have to pay an increased premium. In fact, some people see their rates go up by 10 times or more. With whole life insurance, however, your premium will remain level for the rest of your life.
  • For many senior citizens, a small whole life policy is a better option than term life. This is because term life insurance companies can be much stricter about health-related issues for older individuals. By finding whole life insurance with no medical exam, however, elderly individuals can get the coverage that they need despite their health-related problems.

Whole Life vs. Universal Life Insurance

Both whole life and universal life are permanent policies, which means that coverage will not terminate as long as the level premiums are paid. These two options do have some differences, however:

  • Universal life can be a bit more flexible in the beginning, and you can adjust your premiums to suit your budget.
  • With a universal life policy, there is the possibility of increased rates over the years. If interest rates drop, you could find that you don’t have enough of a cash value to cover the cost of your policy. This means that your monthly premiums could increase substantially.

Although some people do like the flexibility that is offered through universal life coverage, many find that they prefer the stability of a whole life insurance plan.

Whole Life Insurance Pros and Cons

Even though many people find whole life insurance to be the best option for their needs, you do need to look at the pros and cons of this type of policy. Then, you can determine if you should look into whole life insurance rates or another type of coverage.

Whole Life Insurance Advantages

  • A whole life insurance policy can be considered as an investment. It earns a cash value over time, and this money can be used for college expenses or other needs. The money can be borrowed from the policy, and the interest rate is generally very competitive. Plus, some companies will simply subtract the money owed from the death benefit when it is paid out.
  • Whole life insurance comes with many different face values. For a more affordable policy, a senior citizen or someone with health issues, a smaller policy with a face value between $5,000 and $30,000 might be the best choice. If you want more coverage, however, you can seek coverage with a face value of several million dollars if you prefer.
  • Some whole life insurance policies are more flexible when it comes to health-related issues. Although many term life companies are strict about medical exams and medical questions, particularly for senior citizens, the whole life insurance companies that offer smaller policies are typically more forgiving of everyday health issues and generally only focus on more serious things, such as cancer or a heart attack.
  • When you invest in one of these policies, you don’t have to worry about your rate going up in 20 or 30 years. Instead, you will know exactly how much of a premium you have to pay to maintain coverage, and this number won’t change as you age.

Disadvantages to Consider

  • If you are on a really tight budget, you might find that whole life isn’t the best option for you. It can be more costly than other types of coverage, but there are other options out there. For example, you might find a term life policy to be more affordable if you’re in reasonably good health. If you’re older or have significant health issues, you could try burial insurance as a cheap alternative.
  • With whole life insurance, you are depending on your insurance company to invest your money for you. If you prefer to make your own investment decisions, you might opt for a different type of policy.
  • Although guaranteed issue whole life insurance is available for older people or those with health issues, these policies can be more costly and typically only offer lower face values. For those in need of guaranteed issue coverage, burial insurance might be another option to consider.

How to Choose the Right Policy for You

From reading this whole life insurance explanation, you can probably see that whole life coverage can be the perfect policy for many individuals. However, you could wonder how you can get started with shopping for the right policy for your needs. Here are some things to consider:

  • If you are older or have some health issues, you may want to work with a company like Aetna or Assurity Life. These companies offer policies with smaller face values that might work better for your needs. You may also want to go with one of these companies if you don’t have much to spend but still want permanent coverage.
  • If you are in the market for a larger policy, companies like American General, Genworth Life Insurance Company and Banner Life can help. These are all top-rated companies that offer higher levels of coverage; in fact, you might even qualify for a policy that offers several million dollars’ worth of coverage.
  • Checking out several different policies is a good way to find the best coverage for the best price. Therefore, it’s a good idea to shop online and to check out the different coverage offered by various companies before signing up for a policy.

If you have looked at the whole life insurance benefits and are interested in a policy of your own, we can help. Here at United Life Group, we are licensed to sell various types of life insurance policies in all 50 states. We work with some of the best whole life insurance companies in the business, so enter your ZIP code into the simple form at the top of the page to begin viewing quotes for all of your options.