UPDATED: Mar 19, 2020
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Whole life insurance is exactly that, life insurance that is in effect until the end of your life, or until you cancel it, default on payment or have your policy canceled for another reason. If you meet all of the policy equirements, then whole life insurance is guaranteed to payout upon the policyholder’s passing away. Most people consider it to be secure money in the bank.
Is Whole Life Insurance Right for You?
Whole life insurance policies, unlike other insurances, allow policyholder to borrow against the value of the account while they are alive. Many policies even allow the policyholder the option of turning the money over into another investment, like a money market account. The danger of doing this, for instance with a money market account, is the possibility that the account could fail and that would leave the policyholder with a whole life policy that was worth less than the paper it was printed on.
Deciding on Coverage Amount
You should make sure that the total amount of a whole life insurance policy is sufficient to pay for funeral expenses and any unpaid debts that are left behind. It is desirable to have enough insurance to provide sufficiently for your spouse and family for a long enough period of time for them to adjust to losing you. Be mindful of the fact that the larger the payout is the more your premiums will cost. It is important to not commit to insurance plans that you cannot afford.
You will have to name at least one, more if needed, beneficiaries who will collect on the policy. Most times, this is a spouse or other family member, though it can be anyone who may suffer financial or emotional loss if your pass away. Be sure to have discussions with that person and be sure that they understand what is required of them. Also be sure to tell them what they will need to do to file a claim on the policy in the event of your death. It is crucial for your beneficiary to have all of the relevant information about where and how to file these claims. You should consider the fact that you will not be around to help them in this matter. In the event of your death, a whole life insurance policy provides your family with the promise that you have done all that you can for them. You should make sure that you have sufficient coverage for all of your existing payments like property or mortgage payments, in addition to the day-to-day living expenses of
your family and dependents.