How to Buy Whole Life Insurance
- Types of life insurance
- Is whole life insurance right for you?
- Pros & cons of whole life
- Whole life insurance vs. term life insurance
- Step 1: Research whole life insurance companies
- Step 2: Compare possible plans
- Step 3: Gather your documents
- Step 4: Ask for quotes
- Step 5: Choose your insurer and begin paying premiums
- Bottom Line
Types of life insurance
Whole life insurance
Universal life insurance
Permanent life insurance
Term life insurance
Is whole life insurance right for you?
- You need coverage that will last your entire life.
- You want to leave your loved ones funds that can be used to pay costs associated with your estate.
- You want to leave an inheritance, but don’t have a lot of cash saved.
- You own a business and want to prevent your heirs from having to pay any business-related debts upon your death.
- You have a lifelong dependent, such as a special needs child. Whole life insurance can ensure financial stability for your child in the event of your death.
- You want the security of the cash value that will build up throughout your policy.
- You’re a high net-worth individual and you’ve maxed out your retirement savings options.
Pros & cons of whole life
- You’re covered for life: No matter what happens to your health in the future, if you keep making your payments you’ll always have life insurance coverage. For this reason, many parents or grandparents open whole life insurance policies for children when they are young. It could also guarantee you will be covered into old age; if you buy term life insurance when you’re 40, your typical 30-year term will be ending when you’re 70 — getting a new policy at that age could mean paying expensive premiums.
- Cash value: A portion of your premiums is invested and earns a small return. You can borrow from this tax-deferred fund, or potentially withdraw from it.
- Fixed premiums: You’ll always know exactly how much your life insurance bill will be and your premiums won’t increase as you age or if you experience a disability or health problem.
Whole life insurance vs. term life insurance
|Whole life insurance||Term life insurance|
|Premiums remain the same||Yes||Not guaranteed|
|Guaranteed death benefit||Yes||No|
|Choose policy length||No||Yes|
|Covered for entire life||Yes||No|
Steps to buying whole life insurance
Step 1: Research whole life insurance companies
Mutual of Omaha
Step 2: Compare possible plans
- Participating policy: This is a policy that will pay dividends to you based on the insurer’s performance.
- Rate of return on cash value: At a minimum, you’ll want a rate that outpaces inflation.
- Your premium: When it comes to whole life insurance it’s especially important to find a premium that you can comfortably afford.
- Compare riders: Riders are extra features you can add to your policy that could cover you in unique situations. For example, some riders allow you to defer or skip payments in the event that you are ill or become disabled.
- Approval process: When you’re applying for life insurance, there are three typical ways the insurer approves you: fully underwritten, simplified-issue, or guaranteed-issue. If you’ve had difficulty getting approved for life insurance in the past due to health problems, simplified-issue or guaranteed-issue might be easier for you to obtain but keep in mind these types of policies might not pay the full death benefit.
Step 3: Gather your documents
Step 4: Ask for quotes
Step 5: Choose your insurer and begin paying premiums
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