Whole life Insurance is the kind, that is designed to stay in place your entire life. They also call it Final expense coverage.
The premium for whole life insurance is typically more expensive than term insurance premiums. Since the idea is to have one continues premium for your entire life, these premiums are typically more expensive.
The premiums are called fixed and dont’ go up during the life of the insured. YOU
You have to pay these policies until death or for some just for 10 or 20 years when the policy becomes “paid up”
These policies also accumulate cash value, where thats rather low.
You accumulate cash value but only about 3% with every dollar that you spend. If your premium is 100$/month, 3$ would go towards that cash value.
If you’re looking to safe money with your plan for the future, there are other plans available that fall into the same category and are called IUL’s or Index Universal life polices.
With a whole life insurance you typically want to pay your funeral or your cremation with it. It’s not build to be an investment.
The cash value was invented to temporarily cover missed premium payments when the agent back then still was going from house to house very month and pick up the premium payment.
Nobody does that anymore, payment are either drafted or paid per money order to the company per mail. Usually when. You do that they ask for 3 months of premium ahead.
Old people buy it to make sure when they pass away they don’ leave any debt behind for their loved ones.
Today a funeral and burial can run anywhere from 8k-30k depending on your wishes. Average cost is 10k-12k, cremations are on the low end but can be 2k to 5k also.
Things to look for is the individual contract.
Every insurance contract his regulated by the state and by law it has to say on the very front page WHOLE LIFE.
Only these kind of polices are the ones where you have tow wait “2 years” to get full coverage.
It’s called graded coverage. That’s when companies still offer you a contract but for a much higher price than you would usually pay and if you would die in the first 2 years, your family would get all premium payments back that you had spend. But if you die 25 months from taking the policy the full death benefit will be paid out. Exception in case of an accidental death, then typically the company pays out in the first 2 years also. Graded can also come with a higher waiting period, here it depends on the company and the policy that they sell.
Every life insurance policy out there has an incontestability period, which usually means that the company has the right to examine and have a second look on the life of the insured. They can pull the last years of the medical records, have an examination of the body done etc.
If you withheld information on the application about your health condition the insurance company can refuse to pay the death claim, but will refund your beneficiary the premiums you had paid.
