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By: Doris Wray

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Tuesday, 22-Nov-2011 06:06 Email | Share | | Bookmark
Basics of Whole Life Insurance

A life insurance policy that gives the policy holder a lifetime coverage is called Cost of Whole Life Insurance. A policy holder of a whole life insurance will end up paying a level premium that typically gains a surrender value over time. The chosen beneficiaries typically receive a tax-deferred amount from the life insurance policy and provides coverages from lenders, safety of investments.

If the policy holder chooses to end the the contract, he can withdraw or loan the total cash value of the policy. The policy holder usually get this at much lower interest rates compared to others. If the policy holder decides to end the contract or fails to pay the cost of whole life insurance premium, all the benefits shall be forfeited and no money shall be received from the company.

Nevertheless, if the policy holder lives to 100 or 120 years old he shall be awarded a death benefit. This type of whole insurance is referred as continuous premium whole life insurance. This assures a lifelong coverage to the policy holder. By the time the policy holder reaches 100 to 120 of age, the insurance company shall pay him his policy's face value. A portion of the policy holder's premium shall be put on other investments that will accumulate a cash surrender value for the policy holder.

For junior professionals, a modified whole life insurance is the best option for them because they are permitted to render smaller premiums. This is one of different types of whole life insurance. The premium will increase after a specified time assuming that the policy holder's income is also increasing.

There is also a limited-payment life insurance for older people who do not want to keep paying their premiums by the time they retire. For this kind of insurance the policy holder has to pay his premiums for a limited time only. At the end of the term all payments should have already been paid. In general 10, 20, 25, or 30 years are the typical terms to choose from. The policy holder will not be paying any form of premium but will still be covered for a lifetime.

A whole life insurance may tend to be much more expensive because of the necessities that must be covered early on. This is just another disadvantage of whole life insurance. As a substitute for higher return on investments, the sum can be used to cover for the much expensive premium of the whole life policy. Insurance companies does not usually show the ratio of the investments, for this reason it will not be easy to equate it to other ventures. Aside from work accident compensation claim that the value of the insurance policy is reduced due to the rising cost of living.


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