Whole Life Insurance Pros And Cons
Everyone knows that whole insurance should be part of a comprehensive investment portfolio. People take whole life insurance to replace the lost income of a family member who passes on. Nevertheless, there is a lot of debate on the advantages and disadvantages of whole life insurance. Does everyone need whole life insurance (hint, no)? Is whole life insurance an investment? It is important to carefully weigh the pros and cons of whole life insurance before making a final decision.
So what are the whole life insurance pros and cons?
Other than replacing the income of the policyholder, whole life insurance is advantageous compared to other insurance products as:
- It has a guaranteed premium and is tax free,
- The coverage is for a lifetime, and has a cash value
The premium paid on whole life insurance is fixed over the term of the insurance. Premiums are set for life and do not go up due to age or medical reasons. As long as the premiums are paid, you do not run the risk of increased premiums as with other insurance products.
With whole life insurance, coverage is for life. Whether you are 30 or 75, your beneficiaries will receive payment upon death. Other insurance products only cover your life for a specific term, for example 10 years. More important is that the benefits from whole life insurance are free of income tax.
One is free to cancel the insurance at any time. In many cases, whole life insurance will have a refundable cash value. With other insurance products, you will lose all the money paid when you cancel the policy.
There are a few disadvantages in taking whole life insurance. These include:
- Cost of coverage is high
- It is taken for the wrong reasons, and
- You have little control on the investment
Whole life insurance is more expensive as you age. If you have bad habits such as smoking, it may become prohibitive. You also run the risk of taking out a policy when you do not need it. This is unfortunately the case if you have an insurance advisor more interested in the commissions they will make.
Others use whole life insurance as an investment. Unfortunately, the cash value on these policies does not compare to other investments. To make things worse, the policyholder has no control on where his investment portfolio.
Depending on your life situation, one should take the time to learn the advantages and disadvantages or whole life insurance. Only then can one make an informed decision.
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