4 Essential Elements of a Whole Life Insurance Policy

Dec 16, 2020

Life and Health Insurance

4 Essential Elements of a Whole Life Insurance Policy
According to a recent study, 55% of Americans have a life insurance policy. What happens if you die without an appropriate cover, like the unprotected 45%? You’ll most probably leave your family in serious financial trouble. Owning a whole life insurance policy is one of the most practical ways to protect your loved ones from such distress when you’re gone. However, you may want to familiarize yourself with some of the whole life insurance basic elements before buying the cover. After all, preserving such protection requires a lifelong financial commitment on your part. Here’s how a whole life policy essentially works:

Your Whole Life Insurance Policy Has a Cash Value Component

This policy comes with a cash value component that grows from a portion of the insurance premiums you pay. Cash value earns modest interest over time, accumulating into a fund you can tap into while you’re still alive. You may take out a loan against the fund, but you will have to consider the cost as well. Any such loan attracts interest, reducing the cash value and the death benefit of your life insurance policy. Be sure not to use the fund in a way that defeats your policy’s greater objective—securing your family’s financial future when you’re gone. Before signing on the dotted line, consider the following aspects:
  • Does the policy allow partial surrenders or withdrawals, and how might these affect the death benefit?
  • Are there limits to the amounts removable from the cash value component?
  • How many times can I withdraw from the policy per year?

Your Whole Life Insurance Policy Includes a Death Benefit

The death benefit can be the ultimate gift to give to the dear ones you’ll leave behind one day. It’s usually the face value of your insurance policy. If your cover has a death benefit worth $30,000, the named beneficiaries will receive the same amount when you die. Keep in mind that any cash value loans you take will impact the final figure payable to your family. Here are a few things you should keep in mind:
  • Be sure to match the desired death benefit with your family’s estimated future financial needs
  • As the insured, you can name your spouse, children, or other people you care about as beneficiaries
  • The insurer will determine insurable interest and your qualification for the policy based on your age, health, work conditions, and other factors.

Your Whole Life Insurance Policy is Permanent

This insurance protection is permanent in that it covers your entire lifetime. Unlike alternatives such as term life insurance, the coverage doesn’t have an expiry date provided you continue paying your premiums. It usually offers attractive tax benefits that may serve as a financial boost to beneficiaries after losing their sole breadwinner.

Your Whole Life Insurance Policy is Level-Premium Insurance

Premiums don’t increase or decrease with this type of life insurance policy. Since the coverage has an investment component, its value continues to increase throughout the contract. Choose the coverage when you’re seeking the long-term benefit of paying the same amount while retaining access to a growing cash value component as the policy matures.

Should I Buy a Whole Life Insurance Policy?

Consider purchasing whole life insurance if you have dependents that may suffer in the unfortunate event of your death. Examples of people that need this policy include:
  • Parents with kids
  • Parents with kids requiring lifelong care
  • Adults that co-own a house
  • Elderly parents wishing to secure their adult children’s financial future
  • Young adults who wish to rescue their parents from a potentially overwhelming student loan
No matter your age, you can purchase a whole life insurance policy as an act of kindness toward the loved ones who depend on you financially. Do you need help securing the right life insurance to fit your needs? If so, then contact the experts at John E. Peakes Insurance Agency for the assistance you need today. Our dedicated team is happy to address all your coverage needs in Lancaster, California.