If you are considering purchasing life insurance there are numerous options to ponder. Your main decision will be between whole life insurance and term life insurance. Term insurance allows you to buy life insurance for a certain term, usually 10 years and then when the 10 years is up you will need to renew your policy and pay a new premium. With a whole life policy you will be able to keep the same policy and payment for your lifetime. Here is a look at some of the pros and cons of the whole life insurance option.
Pros Of Cash Value or Whole Life Insurance Policies
- Once you begin a cash value insurance policy, you will keep the policy’s terms and your policy is good for life as long as you stay up to date on your premium payments.
- Cash value life plans have a savings component. The longer you hold the policy and the more premium payments you make, the more your cash equity grows.
- Your policy’s cash equity grows tax deferred, meaning you do not pay taxes on the growth until you cash out the policy.
- Your premium will always be the same unlike term life insurance which can take a steep hike when you need to renew your policy.
- Your plan can never be cancelled.
- During the course of owning your policy you may be able to borrow against your cash value.
- You may have the option to cash in your policy for its current value.
- While cash value life insurance is thought by many to be costly, for some people, over the course of their lifetime, it may actually be cheaper than term insurance.
Cons Of Cash Value/Whole Life Insurance
- Especially when you are younger premiums for cash value insurance are usually much higher than term insurance.
- For your policy to build cash value it takes time so if you find yourself needing to cash out your policy early in life you could lose out potentially on a lot of money.
- When setting up your account you will not be allowed to choose your own investments. The life insurance company is in control and will decide how to invest your money.
- Your policy is not flexible meaning that what you set up your account it is what you get for life. If down the road you circumstances change, and you decide your coverage is not enough, you will not be able to add on to your current policy. Instead you will need to apply for a new separate policy for additional coverage.
- Due to high premium prices many young people cannot afford the price of cash value life insurance.
You may now be thinking is whole life insurance a good investment? Is it something that I should consider? Choosing what life insurance policy is right for you takes careful consideration. You should weigh the pros and cons, compare it to your other investments and then make a decision if you should invest or buy life insurance.