When shopping for life insurance, you have a wide variety of options in which to choose from, based on your individual needs and budget. Two common life insurance policy choices are term life insurance and whole life insurance.
Term life insurance is often considered a type of temporary insurance while whole life insurance, is designed to cover you for the rest of your life (as long as premiums are paid). Moreover, whole life insurance offers additional benefits that term life policies don't. Three of the most common benefits of a whole life insurance policy are:
#1 Protection to last a lifetime
When a term life policy expires, your coverage ends. You are then left with the choice of either letting the policy expire, or purchasing a new policy based on your current age and health status. For example, if at age 30 you bought a 20 year term policy and you are now age 50, your term policy will end. You can buy another life insurance policy, but the premium will be based on new rates that may be higher. A key benefit of whole life is that it's considered a permanent life insurance policy. It's meant to provide you with a lifetime of coverage protection with premiums that won't increase, won't expire after a specific number of years, and can't be cancelled due to health or illness. However, timely payment of required premiums must be maintained to keep the policy in force.
#2 Cash value
Whole life insurance has a cash value component that may accumulate over time, and is one of the key benefits of owning a whole life insurance policy. With whole life, it's possible to borrow against some of the cash value in your policy (up to a limit) for any need that you may have. It's important to note that if you were to die unexpectedly, any outstanding loan balance remaining on your whole life policy may be deducted from your death benefit. Outstanding loan balances on your policy accrue interest while you're alive.
Another benefit of whole life insurance is its ability to offer you some flexibility. With its potential to accumulate a cash value over time, you have the option to use this cash for a variety of reasons. You might also choose to simply leave it alone with the possibility of increasing your policy's cash value over time.
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