Whole life insurance provides coverage for life as long as the premiums are paid. These premiums are paid at a fixed rate and the insurance company invests part of the premiums thereby creating a savings account commonly known as the cash value which is not taxed. The cash value can be withdrawn or borrowed at any time, though such a deal can decrease or cancel the death cover. If the policy is affordable and has good rates then there is a need for more tax deferred savings. However, the advantages and disadvantages of whole life insurance and the guaranteed issue whole life insurance need to be carefully evaluated before purchasing it.
Advantages
Unlike other policies, life insurance policy accrues investment that accumulates as the policy holder pays premiums. If the policy is yielded then the holder gets the cash value which is exempted from tax.
Another advantage is that death cover does not decrease in whole life insurance and when the death actually occurs it is not subjected to tax whether taken as a lump sum or withdrawn as a monthly income.
Unlike in the term life insurance where premiums increase during renewal, in whole life insurance the premium remains constant and never increase with time.
Further, whole life insurance policies have dividends which can be used to minimize premiums, generate interest or purchase paid up extras.
Another advantage is that one can yield up the policy at any point in time and recover the cash value back.
Disadvantages
However, as this insurance covers the whole life of the policy holder, subsequently the premiums rates are very high.
Further, most people take insurance as an investment but the cash value received is far below other options in the market.
Another disadvantage is that the insurer manages the whole process making it impossible to improve the returns of the policy by investing elsewhere.
Also check out Joint Term Life Insurance, Cheap Car Insurance, Commercial Van Insurance…
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