Whole Life Insurance Is Still a Good Buy For Many Americans
What is Whole Life Insurance?
Whole life insurance is the tradition form of insurance, and is sometimes called straight life or permanent life insurance. It does not expire after a set period of years like term life insurance does. As long as premiums are paid, or the whole life policy is paid up, whole life insurance is designed to cover individuals for their lifetime. Many times, whole life insurance will cover a person until they turn 100 years old. If the insured person is lucky enough to survive until 100, then the company will simply pay out the face value of the policy.
Why Consider Whole Life Insurance?
Whole life insurance can also build up a cash value, unlike term insurance. Of course, term policies usually cost less, especially for healthier and younger clients. But term life insurance costs less because it is set to expire after a set amount of years. Since the insurance company has taken an application and done their underwriting, they expect the covered person to survive that term of years. In most cases, if the covered person does survive the term of the policy, then they will simply lose coverage.
If a 30 year old buys a term life insurance policy for a twenty year term, they may feel as if they are getting a great deal with affordable rates. An individual may assume that 20 years is enough time for their children to be self supporting and the house to be paid up. There is really nothing wrong with this logic. The only problem is that after 20 years, when the 30 year old has turned 50, they will find that it is much more difficult and expensive to find coverage. In addition, if the 50 year old has developed a health condition in that span of time, they may find it almost impossible to replace the coverage they used to enjoy.
It may have been better to purchase the 20 year term policy at a slightly lower face value, and to also purchase a small whole life insurance policy. Some whole life policies are designed, for slightly higher premiums, to become paid up after a set amount of years. After the 20 years has passed, the term life insurance will still expire, but the older individual will still have lifetime coverage from the whole life policy!
Who Should Buy Whole Life Insurance?
Many senior adults, or their families, are concerned about the price of a funeral. In the US, a funeral can average about $8,000. In some locations, they can cost more. Besides, other expenses may need to be considered like travel, body transportation, and settling up debts. Final expense plans have been developed as an affordable way to plan for this. Because a final expense policy is simply a whole life insurance company with a small face value, life insurance companies are willing to write them with few health questions, and they are willing to accept applicants that are past retirement age.
On the other hand, a whole life insurance policy can be a great gift for a child. Since children are usually very inexpensive to cover, and since the rates on a whole life policy do not increase, this is a very cheap way to provide lifetime security. Many insurance companies will also offer to provide larger amounts of life insurance when the child becomes an adult, and they will do this with no required “evidence of insurability.” In other words, even if the child developed a health problem, they could still obtain more life insurance at the rates extended to very healthy people!
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