Whole life insurance provides you with permanent coverage for your entire lifetime. Unlike term life insurance, whole life never expires meaning you are insured for as long as you live, provided you continue to pay your premiums and don’t surrender your policy. As for those premiums, most whole life insurance policies also guarantee they will not increase.
One of the biggest selling points of whole life insurance is that it offers “cash value,” or has a “forced savings” component. Cash value is money which accumulates, tax deferred, within your policy and can be used for a variety of purposes. Among the most common uses for cash value are policy loans, which uses your accumulated savings as collateral, or to voluntarily forfeit your coverage and claim it for your own personal use. It is important to make clear that the only way you can access this cash value is if you forfeit your coverage.
Before you sign the dotted line, there are a few things you will want to take into consideration. Firstly, a whole life policy builds cash value, you will be paying significantly more for the same amount of coverage you would otherwise get with term life insurance. Also, loans or withdrawals you take from your account can reduce your death benefit payout or even temporarily suspend it defeating the purpose of getting coverage in the first place. Lastly, compared to term life insurance, whole life insurance is more complex.
Generally speaking the majority of people seeking life insurance would be wiser to buy term life insurance as the added benefits that come with whole life insurance, like cash value and permanent coverage, simply will not benefit everyone. For those that do want permanent coverage and can comfortably afford the premiums, or if it fits in as part of their estate or retirement planning it may be worth discussing your situation with a professional insurance advisor.
Due to the fact that a whole life insurance policy is not as straight forward as term life insurance it is recommended that you speak with a licensed insurance broker. Many insurance companies offer their own variations, and the best option is to speak with someone about which plan would fit you best. LifeCover.ca specializes in helping you find you the coverage you need, at a price you deserve by connecting you with a qualified broker in your area. Find out how we can help you by requesting a free comparison quote.