Investing in "Whole" Life Insurance.

by Anna Glendenning | More from this Blogger

26 Mar 2006 02:33 PM

Whole life insurance policies cover you for your whole life--as long as the premiums are paid. The premiums typically remain the same amount as they start. Premiums rates are usually higher than term insurance during the first several years but will be lower than the premiums for term life insurance if you continue to renew in your later years.

Whole Life Insurance policy values grow on a tax-deferred basis. If you decide to cash in the policy, you'd only have to pay taxes on the net gain. For example, say your total cash value was $30,000 and the amount you paid in premiums was $20,000. The difference of $10,000 would be the net gain and you would pay taxes on the $10,000.

One advantage of whole life insurance over term life insurance is that your premiums can become Paid Up. At a certain point, this may mean you no longer have to pay premiums. Never cancel an existing policy to buy a new one until you have thoroughly compared both there are very few instances where this is financially beneficial. Instead, consider buying additional coverage.

Buy as much as you can afford. As an example, the difference between a $100,000 and $125,000 can be less than you might think since the policy fee is often the same regardless of the face amount. Don't buy more whole life insurance than you can afford. If you do and you are forced to cancel the policy early, there can be huge penalties. Some life products have upfront loads which you're paying for initially while others only charge a load if you cash in a policy too early.

If you decide to replace your life insurance coverage, never cancel an existing policy until you are sure you have passed the medical exam, and the new contract has been issued.

When purchasing life insurance it is wise to use an Independent Agent who is not associated with a single company. An Independent Agent is more likely to be able to offer several product comparison quotations with multiple companies. This approach will give you a better overview of available options.

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Learn more about Anna Glendenning

Anna Glendenning is a mother of four. Two biological children grown and out of college, and two siblings and adopted together in 2003. Anna's Personal Website http://www.adoptiveparentsnetwork.

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