To protect the people you love, it’s not just a matter of whether you have life insurance and how much coverage it offers. The type of policy you purchase can also make a huge difference.
If you’re looking for permanent life insurance with predictable costs, whole life is worth a look. But how does whole life insurance work, exactly? Although terms and conditions vary, here’s what to know about whole life coverage.
How Does Whole Life Insurance Work?
Permanent Coverage
Whole life is permanent life insurance, which means your coverage is in place as long as you pay the required premiums. When you pass away, your beneficiaries receive a payout—called a death benefit—they can use to make final arrangements, pay down outstanding debts, or manage ongoing expenses.
This aspect sets whole life apart from term life, which only covers you for a specified period. If your term policy expires and you want to continue coverage, you have to apply for a new policy.
Level Premiums
Another benefit of whole life insurance is that your premiums stay the same as long as you keep the policy active. Even if you experience a medical issue after taking out your policy, you’ll remain covered for the same price you’ve always paid.
Cash Value
After your first year of coverage, your insurance begins to accumulate cash value. Unlike term policies, whole life insurance policies allow you to build cash value. You can access this money during your lifetime and use it for various financial needs, whether you need to cover an expense or fund an emergency.
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How Can You Access Your Cash Value?
The cash value feature means whole life insurance is more than a way to protect your loved ones—it’s a tool you can tap into when needed. You can typically access your policy’s cash in a few ways. Cash value and surrender terms vary based on the policy you choose.
Make a Withdrawal
If the policy is in force and has a cash value, you may obtain a loan on it. You can withdraw the amount you need.
Take Out a Loan
The amount you can borrow is a percentage of your cash value, which varies by insurer. Like withdrawals, loans you don’t repay reduce the death benefit available to your beneficiaries.
Pay Your Premiums
You can use your policy’s cash value to pay future premiums. This may allow you to keep the policy in force, even if you face budget constraints later on.
Surrender Your Policy
If your beneficiaries no longer need your policy’s protection, you can surrender your coverage and receive the policy’s cash value in a lump sum. However, you may incur fees if you terminate your policy during the surrender period, which reduces your payout.
Who Should Consider Whole Life Insurance?
Term life insurance can be a good option if you’re on a budget and your family only needs a financial safety net for a certain period. Permanent insurance can be a better fit if you want the peace of mind that your policy will be in force, no matter what happens to your health. You can count on your premiums remaining the same as long as you keep the policy active.
Whole life may also be a good option if you want a policy that allows you to accumulate cash value.
How Do You Apply for Coverage?
If you decide to purchase whole life coverage, you can get a quote directly from a carrier or through an insurance broker who sells from multiple companies. When you apply for coverage, you’ll be asked to provide a few details, including your age, sex, and the policy size you wish to purchase. In many cases, the insurer will provide a quote the same day.
When you buy traditional life insurance, you’re typically required to undergo a medical exam before the company finalizes its offer. That can extend the underwriting process by several weeks. Depending on your exam results and health history, your pricing could change from the original quote—and the company may even deny you coverage.
However, with guaranteed life insurance, you don’t need a medical exam and can’t be turned down based on your health. These policies, typically offered to older adults, can help prevent your family from worrying about bills after you pass.
Securing Whole Life Insurance from an Industry Leader
If you want to give your loved ones financial security after you’re gone and keep your premiums level until then, whole life insurance is worth considering. This coverage can offer flexibility through its cash value component, and applying is quick and simple.
Interested in guaranteed acceptance whole life insurance with premiums that never go up? Talk to a Colonial Penn agent or visit colonialpenn.com for a quote today.
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Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.
