Benefits vs. Disadvantages
The beneficial features of a Whole Life plan include:
- Guaranteed premiums that never increase.
- Cash value component that increases over time.
- Tax sheltered investment that never decreases in value despite downturns in the market.
- Viewed as an asset by your bank or institution.
- Coverage for life that also provides your family with a tax free death benefit that will never decrease in value.
- You can not outlive the benefits of a Whole Life policy.
- Death Benefits are paid to the beneficiary without requirement to probate.
The Disadvantages of this type of insurance are:
- Cost of coverage is higher than Term Life insurance policies. Since permanent policies offer lifelong coverage, they come with a higher price tag. However, Whole Life typically costs five to ten times more than Term Life insurance initially. Term insurance will eventually exceed that cost and then in most cases expire before a claim is paid.
- It’s not as flexible as other permanent policies, like universal life.
- It can take a long time to build up cash value.
- It’s not always the best investment choice. Depending on the market, the interest you earn on the cash value might be less than what you could get with other investments.