Learn the Advantages, Disadvantages, and Types of Whole Life Insurance

A Insurance Article Contributed by Brandie King

Learn the Advantages, Disadvantages, and Types of Whole Life Insurance

Before you can decide if you want to buy a whole life insurance policy, you need to understand the advantages and disadvantages of having one, as well as the different types of whole life policies available to you.

Advantages of Whole Life Insurance

A whole life policy offers you a cash value accounts with a very low risk. The account will accrue cash value that you can take out loans against. You can borrow from the cash value account to pay the premiums for the policy. Just make sure that if you take out a loan against the cash value account that you pay it back or your death benefit will be used to pay it.

You do not have to worry about the premium being increased and the premium should remain fixed, although you may have the option to make the premiums fixed or flexible. The cash in the cash value account will accrue tax deferred, you will have a death benefit that remains the same for your entire life, and your policy can't be discontinued as long as you have a proper amount in the cash value account.

An endorsement can be added to your policy that gives you the right to buy additional insurance without the hassle of having to retake the medical exam or prove your insurability. You have the option to surrender all or part of the money in the cash value account and either receive cash or change the policy to an annuity.

Disadvantages of Whole Life Insurance

One of the disadvantages of a whole life insurance policy is that you will not have the option to make a choice between interest bearing accounts. The maturity age of the policy is unrealistic because few people actually live to 100 years of age. You will not be able to vary the premium payments each month and the length of time you have to pay premiums for could last a long time. You will never be able to increase the amount of coverage you have with your policy.

If you take out loans against the policy then they are subtracted from your cash value or death benefit and your policy may be canceled due to over withdrawals. Premiums are normally very high, much higher than term life insurance policies. You may find that the cash value of your whole life insurance policy is much less than the actual face value of the policy.

Types of Whole Life Insurance

Ordinary whole life insurance will provide you with a guaranteed death benefit for your entire life, as well as guaranteed fixed premiums and cash values. Universal, or adjustable, whole life insurance is a flexible policy that allows you to design your own plan. Premiums can be adjusted each year, death benefit can be increased or decreased, and you will still accumulate cash value. Survivor, or second-to-die, whole life insurance is a special policy that covers two people at the same time. This is normally used for husbands and wives or people that you are partners in business with.