Whole Life Insurance

Also known as permanent life insurance... whole life combines the pricing of a term policy together with increasing equity or cash value. The result is a premium that will never increase and a policy that will never expire... that is, until you do.

Companies base their rates on the expected mortality of large numbers of people. This is true for every type of policy from the cheapest term to the most expensive whole life.

Permanent life insurance costs more than term and the extra amount you pay is invested by the insurance company.  This is a reserve that permits the company to guarantee a level premium for your lifetime.

A whole life policy is not an investment in the traditional sense, but over the long term it is possible for significant cash value... equity... to accrue. In fact, it is not unusual for the future cash value to exceed the total premium that has been paid.

The most significant benefit for permanent insurance is that it will always be there to pay the death claim --- regardless when you die. This is not true with a term plan.

There is a long-standing argument related to term versus whole life insurance.  Proponents of term claim it's better to buy the cheaper policy and invest the difference in premium.

What is seldom recognized, however, is that you will always have more tax-free money to pass on to your beneficiary by using life insurance. And, when you buy term, more than likely it will expire long before you actually die.

The permanent type of policy will always pay the death claim provided you have paid the premium on time.  In addition, the cash value is available for you to borrow in the event of lifetime emergencies.

One of the smartest ways for you to buy a whole life policy is to purchase from a mutual life insurance company.  These types of companies pay annual dividends, which can significantly enhance the value of your policy.

By the way, it's important for you to have a clear understanding of how term insurance works in order to make a rationale decision.