2006-07-20T08:43:00.000-07:00

Whole life insurance is one of the most commonly utilized forms of insurance. Often referred to as "permanent" or "straight" life insurance, it is a form of life insurance that can be maintained through one's entire life. Whole life insurance policies are popular due to their ability to provide financial protection for beneficiaries while simultaneously generating a cash value that may be of use to the insured.

In many whole life insurance policies, one can choose to pay a regular premium that remains unchanged throughout the life of the policy. The total cost of the policy is basically averaged over the life of the insured. Usually, whole life policies are designed so that the benefit amount of the policy will be equal to the sum of all premiums paid by the insured through the age of one hundred years. If the insured should reach the age of the policy's full maturity, the face value of the policy would then be paid directly to the insured. Whole life insurance policies generate what is termed a "cash value." Basically, this sum grows as one pays premiums. The cash value of a whole life policy is allowed to increase over time with the taxes on its value deferred. If one opts to cancel their whole life policy, they will receive a payment of the accumulated cash value of the policy. One may be required to pay some taxes on the lump sum payment in particular circumstances.

The cash value of whole life policies makes them very attractive to many consumers. Unlike term life policies, for instance, whole life insurance not only provides a death benefit but also accumulates useable cash reserves.

Those with whole life policies do not intend to pay insurance premiums until they reach the age of one hundred. After all, even the most optimistic among us realize we are unlikely to reach that milestone. Instead, whole life insurance is used as a means of protection of future income while one is working and is then later often used to provide cash resources during retirement.

The cash value of whole life insurance policies can also be tapped prior to retirement should an emergency need arise. The insured is able to take out the equivalent of a loan against the life insurance policy and is then afforded the opportunity to pay that loan back in order to restore the policy's full value. Whole life insurance policies really accomplish two different things. First, they do provide the insured with a way to protect loved ones from financial loss should the insured die. Benefits are paid to the beneficiaries based on the stated benefit level of the whole life insurance policy.

Simultaneously, one is able to create a source of cash reserves by paying regular premiums-with all taxes deferred until dispersal. The policy can eventually become a means of supplementing retirement income or as a mechanism to handle an emergency financial problem during the life of the policy. The protection and flexibility provided by whole life insurance policies makes them very attractive to many consumers and a key element of their long-range financial planning.

De Insurance