5 Reasons to Consider Whole Life Insurance

Back in the 1990s there was a move afoot in the U.S. that had people cashing in their whole life insurance policies in favor of a strategy called, “buy term and invest the difference.” This advice became popular because people realized how much more expensive whole life insurance was to purchase compared to term life and, although whole life policies contain a cash accumulation component lacking in term policies, this accumulation was slow and at only a slight interest rate compared to what was possible to make at the time in mutual funds or in stocks and bonds.

When the dot.com bubble burst in the year 2000, with the NASDAQ falling as much as 78%, many who had bought term and invested the difference saw the floor drop out from under their feet. While there are no guarantees in investing, the cash accumulation associated with whole life policies is guaranteed to increase each and every year for the rest of the policyholder's life, regardless of what the markets do. That's a big plus.

Whole Life vs Term Coverage

The major draw to obtaining term life insurance is that you can obtain a much higher death benefit for the same amount of premium you'd pay for whole life coverage. This makes the coverage attractive to younger individuals on a tight budget with a growing family to protect. The downside is that this premium level is only guaranteed for a certain “term,” after which the premium payments will increase. You'll also have to re-qualify for a new policy and any existing medical problems acquired could conceivably stand in the way of getting that new policy.

The premiums on whole life coverage are guaranteed for life, as long is your policy remains in force. You'll also never have to re-qualify for coverage even if subjected to failing health. Here are some other major reasons to consider whole life insurance coverage:

1. Your cash value won't be subject to losses in the market.
2. Any dividends you may receive aren't taxable.
3. You have access to your cash value at any time and for any reason you choose. This is without paying any taxes or paying other penalties.
4. Your insurance is guaranteed for life as long as you keep your premium payments current.
5. Benefits paid upon your death to your named beneficiaries are tax-free and guaranteed.

Here's more information. Consult an insurance professional for the whole story.