Facts of Whole Life Insurance policies

Posted by

May 27, 2008

Whole-life insurance makes a great way for all that realize they can provide for their families enough coverage after they have passed away. Having the peace of mind knowing their partners and their children will be able to continue their lives without burden. It is great relief knowing that the mortgage will be paid, food will be on the table, and their children will be able to have a college education because they know they have purchased enough coverage to secure their families future.

This insurance is unique because it carries a two-edged sword that contains a fixed amount of money paid upon death, and a cash value that is created by the insurance agents company investing part of the insurance premium paid on the insurance policy. Universal life and variable life and variable universal life are also permanent policies.

Universal permanent life insurance is split up of two components of: Term life and market value rate of return. Variable life and variable universal life investment funds hold hands with a stock or bond, or a Mutual-fund investment. Term life insurance covers your death in a time policy that expires on a set amount of time, it is very easy to renew but premiums increase in a very large way, as you grow older.

Finding the right policy that you can afford can be very easy or painfully hard.
Whole-life insurance agents like to sell whole-life insurance policies because they receive very high commissions on these type policies. It is a dog eats dog commission because almost all the money paid into the policy over the first year goes to the agent for their pay. The agents like to explain whole life insurance beats term insurance because you own it for the rest of your life and it gains liquid cash value to borrow.
The agents do not tell you the fees and commission involved woven into the policy. If you close the account early the fees can leave you with nothing even after 10-15 years. Building a cash value is not as power full as in past days because IRA’s and 401k have very small commissions and larger cash benefits and you can move them if need be.

If your going to buy whole-life insurance buys what you need because the insurance you are buying is to replace your income. The experts advise to purchase five times the amount of your annual income and up to ten times if you have large debt. Realize how much your partner will need to continue being able to send the kids to college and paying bills. If this policy is available with a IRA or 401k can help you decide on how much money you need from the whole life insurance policy.

Calculating how long you will need the insurance policy is very important because you want to make sure the money is there until the kids can grow up and be independent not needing to be covered under the policy. Life insurance should not be the only policy for retirement. You want to plan to have the cash you need to live on and not having to pay premiums for the rest of your life. A reliable accurate idea for how long is about 20-25 years. Paying a policy that pays off your mortgage at death is not wise because the value of the mortgage balance decreases every year. Why pay for something that is decreasing. Including mortgage pay off should be added into the figure for how much life insurance to buy.

Lets face it the cost of insurance is much higher for people with major illness. If you are under a doctor’s care for heart or gross obesity you will pay up to 50 percent more in the cost than people in good health. People that have hi-risk jobs also pay the high premiums as well. It is always wise to shop around for this type of insurance because some are better than others for the high premiums polices. Needles to say people with good health pay a lot less. Remember it is wise to buy insurance while still being young for the best cost.

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