Whole Life Insurance is for when you die, right? Though Whole Life Insurance does include a death benefit, it is only one small component of a whole life policy. Really, there are two basic functions of a whole life: the insurance component and the asset component.
Both elements are important and valuable, however, because Whole Life insurance tends to be categorized with other life insurances; we wanted to give you a basic break-down of it.
The Basics of Whole Life Insurance
In laymen’s terms, it is an insurance policy that provides assistance when you die and at the same time, provides you cash to invest while you are living.
A Whole Life insurance policy is two-fold, it protects you financially in the event of an unexpected event (aka death) while also providing access to cash, like a ‘rainy day’ fund.
Component One: The Insurance Element of Whole Life
A Whole life policy is still an insurance policy for your life. It does pay a stated amount upon the death of the policy holder. There is still a designated beneficiary (or beneficiaries) to the death benefits.
Whole life insurance is for the person who wants guaranteed permanent coverage with a guaranteed premium for life.
Component Two: The Asset Element of Whole Life
A Whole Life policy is a way to accumulate wealth as the regular premiums paid go toward insurance costs, but also contribute to funds increasing in a ‘savings account’.
This ‘savings account’ holds the cash value that is part of your whole life policy. And while the cash value is ‘saved’ within the policy, it is unlike a traditional savings account.
A traditional savings account only allows you to withdraw money so many times within a given period before you are penalized. And dependent on the type of savings account, you may only be allowed to withdraw money for specific reasons.
However, the cash value of a whole life policy is available to you for anything you want or need – literally anything!
Time to Get a Policy of Your Own
Each whole life policy is tailored to the lifestyle and financial needs of each policy holder. So there are many options that are available to include with your standard whole life policy.
With any and all additions to a whole life policy, the two foundational elements always remain. You still always have the death benefit, and the cash value asset at your disposal as part of your whole life policy.
Now that you know the basics of Whole Life Insurance, it’s time you went out and got a policy of your own!
Listen: Leave Your Legacy