Whole Life Insurance: Your Knowledge Base
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How is shopping to you? Don’t prompt to say in a hilarious teenish sweetie voice–Oh, yeah. Fun! I love it.
Take a moment and say.
Yes, you now agree that it is a long roller-coaster journey down a twisty track, do you? Leaves you darn exhausted. You just cannot outsmart yourself in the crowd of options. The excitement that Christmas creates in you just vapors away soon after you enter the supermarket mall. What to choose from the hundreds? The colors confuse you. So do the styles. Above all, remains budget.
This is confusion. My mom used to say — confusions are beneficial. They are enlightening, helping you to decide.
This is true as regards life insurance. It is more intriguing than Christmas shopping. For Christmas shopping you buy what you buy. You wear it. You give it to someone you love. But when it comes to insurance, you just cannot be the least judgmental.
You must remember your money is going off. That is why you must know the types of life insurance that are out there. Variations are there—both in names and character. Unless you know them all clear, you may have to repent. So here are the basic questions that you might ask. So here are the questions that you need to ask before you decide.
What is a whole life insurance?
Not to go give you an academic-type definition, let me go simple:
You want to stay assured that your beloved ones stay secured when you cannot be by them. As you cannot leave lots for them, you are looking for a policy that is best for both you (to pay premiums) and those you care (when they need). You want that your policy should prove handy even when you are by them. Or you want that you should be able to make use of your moneyfor any of your situations or obligations. That is, you kind of want to both invest and deposit. You commit to keep paying regularly for your whole life. The policy that you buy is whole life insurance.
Now to make it a bit academic in simple words: A whole life policy is a life insurance product that you pay premiums for as long as you live so that your nomineegets a certain financial benefit after your death and you draw some profit during your life-time.
What are the types of whole life insurance policy?
Whole life insurance policies fall in the following three categories:
Universal : Your premiums go proportionately to your insurance as well as investment. So your cash valueis guaranteed.
Variable:You premiums go in larger proportion to investment than to insurance. You stay assured of your face cash value.
Variable Universal: Your premiums go into investment, building cash value which you can invest in different money businesses. Cash value depends on having it. However, insurers mostly guarantee cash value.
What are the pros of Universal life insurance policy?
Universal life insurance is the most popular of insurance products. It has more pros than cons: The following ones are prominent:
a) The premiums are at your discretion. You decide how much and when you will pay them.
b) Your premiums remain the same throughout.
c) Part of your premiums goes into cash account which earns you tax-free interest.
d) The cash value counts for your premiums. So you may not have to pay premiums to the end.
e) You can receive loan (up to a certain percentage and until certain premiums have been paid) from your insurance policy.
f) Your death benefitcan be adjusted to an increase or decrease, as it suits you.
g) Your cash value is guaranteed.
h) Your cash value may increase, depending on your dividend. However, dividends are not guaranteed.
i) The premiums do not change.
What are the cons of Universal life insurance?
The following ones are worth considering:
a) It is pretty, if not higly, expensive.
b) The cash value for which you have it pays far less than you could otherwise have had.
What are the pros of Variable life policy?
Variable life policy, as you already know, is a mix-up of both investment and insurance. Here go the pros:
a) Variable life insuranceguarantees your nominee’s getting the face value cash.
b) Your investment contributes to cash value.
c) Premiums are flexible.
d) You are free to choosewhere you want to invest into.
e) Your investment returnis tax-free.
f) You can borrow on it.
g) You can adjust your premiums from your investment cash value.
What are the cons of Variable life policy?
a) You are going to find it pretty expensive.
b) You bear the underlying risks your investment may incur.
c) The success of cash value depends on your investment success.
What are the pros of Universal variable life policy?
Universal Variable Life Policy is one of the most criticized policies that exist. If you look up the pros and cons of this policy, you will find most people, both users and experts, speak against it. However, the following pros can be attributed to it:
a) As it is more investment (than insurance),
your investment builds up cash value for you.
b) The cash value can be converted to premiums.
c) Payment of premiums is flexible, both in terms of time and amount.
d) Your cash value may earn tax-deferred interest.
e) You haveoptions to choose from where you want to invest your money.
f) Your money is invested in the financial sectors. So if time favors, you can expect good returns.
g) You can borrow against your cash value build-up.
What are the cons of the Variable life policy?
Unless you are an insurance agent you are not likely to find cons in a variable life policy. Here is a list of some of the cons often presented:
a) You pay pretty nagging high fees and charges.
b) You cannot back off your policy up till a certain time. Else you lose everything.
c) You bear both the theoretical and practical risks of investing into businesses unless your policy offers a minimum guaranteed rate of return.
d) You may virtually get nothing even if there is a minimum guaranteed return as the negligible amount (up to 2%) is devoured up in charges.
e) You make a minimum or maximumpayout as premium. So it is premium-flexy.
f) You pay twice for the business you want to do. You let the company use your money for business. Again, you pay the company fees that they are investing your money.
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