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Please Explain A Whole Life Policy?

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Please Explain A Whole Life Policy?

Postby Mai » Tue Sep 19, 2017 2:31 pm

Do you mean the absolute benefit? or the benefit compared to a term policy? These are two different things depending on how you view money.

Overall, a whole life policy is a term to 100 policy with a cash component built in where the premiums are fixed for a period of time.
Term to 100 means that you will be covered until you are 100 years old; the longer the period of coverage the more expensive the premiums (because the more likely you will die).

The insurance company takes your premium - Let's say it's $100/mo and covers its insurance cost for term to 100 - Let's say the cost is $70.
It then invests the remaining $30 into fairly secure and stable assets.
Each year you will get paid a dividend based on the return of your investment and the performance of the company.
Most good companies will have a dividend.

This does not mean that a whole life policy is right for you because you could always take out a term policy for much cheaper to cover your needs and use the leftover money for other things.
Let's say you have a child and want to ensure their protection.
You could take out a 20 yr term policy for less than half the price of a whole life policy and use the extra funds for whatever.
When it renews in 20 years the premiums will be more expensive, but at that time you might only need it for a few more years until your child can stand on their own two feet.

There are only two good reasons to take out a whole life policy:

1) You want people to gain money when you die no matter what age that may occur.

2) It's the cheapest way to pay for an expensive funeral.
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