Making a Case for Whole Life Insurance
It is common knowledge that whole life insurance premiums are more expensive than comparable types of life insurance, particularly term life insurance. Where term insurance provides coverage for a certain term (number of years), such as 5, 10, 15, 20, 25, or 30 years, permanent policies, such as a whole life policy, provide coverage on a permanent basis for the life of the insured person.
Whole life insurance provides a guaranteed death benefits; so does term life insurance.
Whole life insurance offers a guaranteed premiums that never increase, buy may be reduced or eliminated. Term life insurance rates are guaranteed not to increase during the term of the insurance, but after the initial term has ended, the insurance goes away and a new policy would have to be issued at the older age. With all insurance, as you age, life insurance costs more over time.
Whole life insurance builds a cash value that can only increase over time; term life insurance does not build cash value.
An insurance company can either be a stock company or a mutual company. A stock company means that the owners of the company are the shareholders. A mutual company means that the owners of the company are the policyowners.
If a whole life insurance policy is issued by a mutual company that policy may be a participating basis. A participating policy is a policy where the company pays annual dividends to the policyowners. These dividends can be used to increase the policy’s cash value and death benefit or can be paid to the policyowner in cash. Because term policies do not build cash value, nor are they issued on a participating basis, there are no dividends issued to term life insurance policyowners.
Whole life insurance and term life insurance provide flexibility in how premiums are paid; monthly, quarterly, or annually options are available. However, some whole life insurance policies come with additional premium payment options. While most require premium payments for the entire life of the insured, there are whole life insurance policies issued on a 10-year pay basis, 20-year pay basis, or paid until age 65.
Life insurance premiums are largely determined by factors of ages, sex, overall health and medical history, amount of insurance, physical build, tobacco use, and other factors. All other factors being the same in all of these examples that follow: A younger person will pay less for the same amount of insurance as an older person. A male will pay more for life insurance than a woman of the same age. Someone who has excellent health will pay less than someone who has any type of ailments. There is also an increasing risk of developing medical conditions that can make life insurance too costly or may render a person uninsurable as we age. The greater the amount of insurance, the more it will cost. A person that is overweight or underweight, based upon average height and weight proportions of the general public, will pay more. A tobacco user will pay more than a non-tobacco user.
Your unique needs and financial situation are just two factors in determining how much life insurance you should have. To learn more about your life insurance options, please contact Jones Wealth Management Group at 901-312-9166 and schedule a no-cost, phone or in-person consultation or a no-obligation insurance quote.
Insurance company guarantees are based upon the claims-paying ability of the issuing company. Dividends are not guaranteed