Whole Life Insurance
It is the original and oldest form of cash value life insurance. Instead of playing just the cost of insurance, you pay higher premiums.
The difference between the cost of insurance and the premiums goes into your cash value. Whole Life policies give you a guaranteed rate of interest. Some insurance companies may provide dividends, but dividends are not guaranteed.
Permanent Life: Term & Cash
Also called cash value life insurance, there are different types of permanent life insurance.
The cash value compounded with interest built up in the early years will pay for the higher COI in the later years, so the policy can last a whole lifetime.
Whole life policy is not very flexible. The premium is fixed, the interests guaranteed, and the death benefit fixed. Since insurance companies have to guarantee the interests for the whole life , they tend to give conservative rate. As a result, the cash build up can be slow.
It should be noted that these types of policies may have surrender charges ( fees associated with selling the policy in the early years).
Table of Contents
What is Whole Life Insurance?
Life Insurance is an agreement via contract between a consumer and a Life Insurance company, that states the consumer will pay a premium on a monthly basis, in exchange the Life Insurance company will pay out a benefit upon the death of the consumer. This payout will be paid to any one of the consumer’s choosing – usually, a loved one, a child, or a spouse. This money can then be used for studies, living arrangements, or to even help with funeral costs if there is a need. Putting your mind at ease for your death will grant you serenity for when the time comes.
Key Takeaways
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As opposed to Term Life Insurance which is only for a set time period, Whole Life Insurance lasts for life .
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Upon the consumer's death, Life Insurance is paid out to the beneficiary of choice of the consumer.
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Whole Life Insurance has the added benefit of having a cash savings component, which the consumer can use to draw money from.
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The cash value of the Whole Life Insurance works on a set interest rate.
Understanding Whole Life Insurance in Vancouver
Vancouver is a place like no other but still suffers from the same issues as the rest of the world. Rising interest rates, higher home prices, the burden of college debt, and the lists of things we need to pay or prepare for financially are endless. Add uncertainties like the current Russian Ukraine war, and it really becomes evident that preparing for the worst is vital.
In exchange for the premiums paid overtime, the Insurance company will pay out a death benefit to the beneficiaries of choice, upon the consumer’s death. As a bonus, the policy will also include a savings portion – with the death benefit of course. This savings portion will grow based on a tax-deferred basis.
In order to build on this savings portion, the consumer will have to make extra payments, known as Paid-Up Additions. The consumer can then withdraw from these funds, or even take out a loan that has to be paid back at varying rates.
Special Consideration
The death benefit paid out is usually set out and agreed upon before signing a contract. While some policies are eligible for dividend payments, and to increase the total amount paid out upon the consumer’s death, they may opt to have dividends purchase additional death benefits.
As you might expect, certain events might influence the total value of the death benefit. Unpaid policy loans will reduce the value of the payout.
Example of Whole Life Insurance
Whole Life Insurance in Vancouver has a great benefit in that the entire death benefit will be paid out even if the accumulated cash value is far less; for instance:
Rogers has taken out Whole Life Insurance with a death benefit of $30,000. If Jonah has paid off policies to the total of $15,000 at the time of his death, that would mean that $15 000 is left to pay correct? Well, the insurance company will still pay out the entire death benefit.
Benefits of Whole Life Insurance
As with most places on earth, it is better to be covered; especially in today’s world. Vancouver is known to have a higher cost of living, especially housing costs. Thus, let us list the benefits of Whole Life Insurance:
- Whole Life Insurance does not expire
- Your premiums remain unchanged for the duration of the policy
- Whole life insurance builds cash value
- Whole life insurance has the ability to earn dividends
Whole Life Insurance vs Term Life Insurance
Whole Life Insurance | Term Life Insurance | |
Premium Payment | Fixed Premiums for Life | Increases Yearly, as the Premiums are influenced by your age |
Policy Period | Lifetime, as it will not expire | Set Years, and can be extended for another 10 years upon expiration |
Benefits | Cash Value can build up Set Premiums | Income Tax Benefits Cheapest |
Universal Life Insurance vs Whole Life Insurance
Whole Life Insurance | Universal Life Insurance | |
Premium Payment | Fixed Premiums for Life | Can be increased or decreased to adjust death benefit amount |
Policy Period | Lifetime, as it will not expire | Lifetime, as it will not expire |
Benefits | Cash Value can build up Set Premiums | Income Tax Benefits Variable interest rates on your investment funds Flexibility on the Premium Payment amounts |
How much is Whole Life Insurance in Vancouver
Because of the nature of the service being sold, various factors of your life can influence your Premium Payment amounts, such as:
- Smoker Status
- Age
- Gender
- Your medical history
- Family medical history
- Height and weight
- Risky behaviors (drug use etc)
- Driving history
- Dangerous hobbies
- Dangerous occupations
All these factors will be taken into consideration before your Premiums will be calculated.
Benefits of using Life Insurance Broker when buying Whole Life Insurance
Due to the various factors that can influence the price, you’d want to put your best foot forward before the Premium is decided right? The same goes for choosing which option of Life Insurance would be best for you. If you’re going to take out a Whole Life Insurance, it will be crucial to have someone to defer to and trust as you make a decision that’ll influence your entire life. Thus, a Life Insurance Broker is absolutely key to you making a great success in this endeavor.
Because these individuals have years of experience in this work environment, they will be able to assess your life situation to find the correct option. Further than this, they can advise you to make small changes throughout your daily life that might drive down the cost of your Premiums. Having insight into both the market and your personal finances (and daily life) will give all the parties involved the best clarity, allowing for a smoother transaction. Plus who wants to do all that admin, am I right?
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