Whole life insurance lasts for your entire lifetime, as opposed to term life, which is for a set number of years.
These policies also build cash value over time, which you can borrow from or cash out.
Why buy whole life insurance
Whole life insurance is permanent and your premium is locked in at the rate it currently is when you purchase it. So, if you were to purchase the policy when you were younger, you get to enjoy the savings as you age.
These policies also build cash value throughout the policy.
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How the cash value of whole life works
The cash value of your whole life policy may accumulate on a tax-deferred basis.
To access the cash value of your policy, you simply request a withdrawal of funds or a loan. Interest is charged on loans. Unpaid loans will reduce the death benefit by the amount you borrowed.
Also, you may withdraw funds up to the value of total premiums paid, tax-free. Withdrawals reduce the cash value but not the death benefit.
How much does a whole life policy cost?
Whole life costs a bit more than term life since there is no expiration date to the policy and has a savings aspect to it.
Someone who doesn’t smoke and is 30 years old can purchase a $100,000 policy for around $90 per month, on average.
Should I buy whole life or term life?
This depends on what you are looking for.
If you are interested in both and are finding it hard to choose, ask yourself: “Would I rather have a smaller premium for higher coverage with an expiration date? Or would I rather have a higher premium for a smaller benefit that is permanent?”
If you want your life insurance to be permanent and have a savings vehicle, whole life may be for you.