Do You Really Need Whole Life Insurance Plan?

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For people who have a family that relies on your for financial assistance, you need some form of life insurance coverage. Life insurance will pay a benefit to your loved ones at the time of your death. The amount of money can be used any way your beneficiaries wish. There are several types of life policies and it is important to understand what to choose.

What is actually whole life insurance?

Whole life insurance gives permanent coverage. It means that the policy will not expire as long as you keep paying the premiums. This policy type comes with an extra component: a savings account. A part of the amount you pay as premiums is deposited in the policy's account. The cash value grows at a fixed or variable rate. Just after five or ten years, depending on the policy, you can withdraw money from the account. If the policy gets canceled, the insured received the cash value. You can even borrow against the policy and it works like a normal loan. If you do not manage to pay your debt before you pass away, the agency will pay the amount from the policy's coverage value. However bear in mind that this will lower the benefit received by your beneficiaries.

When do you need it?

A whole life insurance coverage is definitely a long-term investment. The cash value grows at a very small interest rate, so you'll have to wait several years before you save a substantial amount of money. If you feel that you will need life coverage during retirement, a policy can bring lots of benefits. It means that you will have dependents into your late 60s. Even if this does not happen and your loved ones don’t need the money, you can borrow against the policy to cover retirement expenses. You can also keep your permanent life coverage to pay for your funeral.

You can also use life insurance coverage as an estate planning tool. By transferring ownership of the policy to one of your family members you can actually avoid paying some taxes. Furthermore, since the policy's benefit is tax-free you can use it as a way to transfer money to your heirs. As an example, you can purchase a $1 million policy and pay for it by liquidating a part of your assets.

Consequently, do you need about whole life insurance? Yes, if you feel that your family will need financial protection when you are retired or if you are wealthy and need to protect your asses from estate taxes.

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