Money Matters - Whole Life Insurance

By Joseph Mattera

Two hundred thirty years ago, on Tuesday, we claimed our independence from Great Britain. More than 100 years ago, whole life insurance was invented, and it claimed its independence from term life insurance.

Whole life insurance is life insurance you retain for your whole life, unlike term, which covers you only for a predetermined period of time. Term life insurance has no cash value. Whole life insurance builds cash value.

Life insurance is considered the foundation of a strong financial plan. The more stable or guaranteed the insurance policy is, the more secure the plan becomes, especially in an estate settling situation.

Whole life insurance was designed with guarantees built into it backed by the full faith of the insuring company. Many people appreciate the simplicity that this type of insurance provides. Some of the components of whole life insurance are as follows:

-Whole life provides a secure framework for long-term planning.

-The death benefit is guaranteed never to go down, as long as the premium payments are met.

-Usually, the cash value will continue to grow until the policy matures.

-Some life insurance companies pay dividends (return of excess premium), although not guaranteed, that contribute to the cash buildup inside the policy.

If set up properly, the cash buildup in a whole life policy grows on a tax-deferred basis, and the death benefit is paid to the beneficiaries' tax-free a majority of the time. Money inside the policy is easily accessible through loans or withdrawals from the cash value. You need to sign a form and provide the company basic personal information.

A unique feature of certain whole life policies is a rider that can be attached to a policy. This rider allows for additional deposits into the policy, a sort of side fund where the money grows similar to a savings account, the difference being the cash grows tax-deferred.

Two other common riders that can be attached to a whole life insurance policy are as follows:

-A waiver of premium that pays the premium if the insured becomes disabled.

-An accidental death benefit rider that pays multiples of the death benefit if the insured dies because of an accident rather than natural cause.

Whole life insurance provides guarantees in a financial world where not many guarantees exist anymore. It could be the life insurance of choice, if you want a solid foundation to your financial plan.

If you decide that whole life is right for you, start by looking for a company that has a good rating by AM Best. This is usually a good indication of how stable the company is and also details its solvency (financial strength).

Because we live in America and have freedom, the choice of how to protect your loved ones is entirely yours. Take the time to investigate how whole life insurance can provide a solid base for your financial future and keep you protected for the rest of your life.

You can comparison shop whole life insurance policies by visting QuoteRetriever.com