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Whole Life Insurance Options

Is Whole Life Insurance Worth The Extra Cost? whole life insurance

Understanding Whole Life

You are looking for life insurance, you may be offered whole life insurance. These policies are more than a simple insurance plan. They are also an investment plan that could be a vital part of your retirement system. Before deciding if this is the right tool for you, it’s important to understand the pros and cons.

Benefits of Whole Life

An investment vehicle, you build cash value in the plan. Tax deferred until retirement, it’s a valuable add-on to your 401k. Once the account reaches a certain value, you can stop making payments. Like the 401k through your company, you can take cash loans to cover unexpected expenses.

Perhaps the greatest benefit of this insurance is that the premiums will not increase during your lifetime. Unlike term policies that expire after a set number of years, this coverage remains with you throughout your life provided you make payments and repay loans as agreed.

Disadvantages of  Whole Life

Of course, there are some negative aspects to these investments. Whether they are right for you will depend largely on your needs and what you are seeking in a retirement plan. While you can invest money tax-free, you may have limited input as to where the funds are invested. Most whole life plans do not allow you to choose where investments will go, and you also cannot usually alter the face value once the policy is issued. While this may not be a problem for you, it can become a challenge if your needs or retirement plans change drastically.

Designed to be an investment vehicle, this type of insurance is also more expensive than term coverage. However, the rates become more reasonable as you age and the premiums for term life start to rise. If you have a family history of serious health conditions that could leave you difficult to insure later in life, then this could still be the right choice for you.

Once you understand what Whole Life Insurance is and how it works, you can make the determination about whether it is right for you. You may decide that your money is better invested with a traditional IRA. On the other hand, this is the better choice if you are not disciplined about setting money aside and need the extra motivation to follow through with your retirement plans.