Whole life insurance is a type of permanent life insurance whereby the insured person is covered for the duration of their lives as long as premiums are paid on time.
Whole life also offers a saving component to the insured person. Apart from the investment, the insured person can also borrow from the company that he or she pays the premiums.
Pros of Whole Life Insurance
- The insured can save
While life has cash value guaranteed to the insured. The insured is free from the burden of tax when he or she uses the whole life insurance policy hence the saved money does not face the tax deductions.
- It pays benefits
The company will pay the beneficiaries when the insured person dies and this saves the beneficiaries as they will be able to meet other needs like the hospital bills and other bills that will be accrued to the insured.
- Predictable premiums
The insured is able to budget himself or herself as the payments of the premiums is concerned. This will make it possible for the insured to pay his or her premiums on time and without failure.
- It may pay dividends
With whole life insurance, the insured can enjoy the benefits of being paid dividends at the same time his or her life is insured.
- The insured can get the loan
The insured may use the amount saved as a collateral to get a loan. This may make it easier for the insured to get a loan in case he does not have any other security to obtain loans.
Cons of Whole Life Insurance
- It has high premiums
As the insured is insuring against life which is very delicate, the companies put high premiums to be paid by the insured so that it may be able to compensate the beneficiaries in case something happens to the insured at any time.
- Not flexible
With whole life insurance, the insured is not able to terminate the contract before he or she has reached the required age. In case the insured terminates then there is a risk of not being paid by the company because they may take it as the insured is not paying the premiums during that time.
- Its loans are subject to interest
The loans that are offered by the insurance company are subjected to interest hence it may make the one taking a loan to pay a lot of money at the end.
- It takes a long time to build cash value
The insured has to pay a lot of money before it accumulates and builds up to cash value. This may take longer depending on the amount that the insured is paying as premiums.
- Not best for investment
This is because it may take long before the insured starts benefiting from the amount of money that he or she is saving.
Whole life insurance policy is very expensive and yet it only covers the life of the insured hence many people do not prefer it over other types of insurance policies.