What Is Whole Life Insurance?
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Whole life insurance is often referred to as permanent life insurance and it is designed to provide coverage through the whole life. There is also a cash value element that is usually part of the policy.
A standard whole life insurance policy maintains a constant premium level, and a constant face value level. The premium is based on projected costs and your present age, and an amount is also built in to accommodate a portion to go toward savings which will ultimately equal the face value.
The cash value accumulates very slowly at first, then picks up later on. It may take up to twelve years to see a sizable cash value. This amount may be borrowed – with interest – once there is enough cash value present. The interest rate earned on the cash value will have a stated value in the policy. If the insurance company prospers, there may also be dividends paid out, but they usually are not guaranteed.
Whole life insurance is considerably more costly to buy than term life insurance. In the first few years, much of the premium goes toward paying the insurance agent's commission for selling you the policy. Because an agent will make considerably more profit (commission) on a whole life policy, they are more apt to try and sell you one.
This type of insurance does have a place and it can be good for some people. It largely depends on their needs.
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