The two main options you have when buying a life insurance policy are to purchase a term life policy or a whole life policy. For many people, the option of whole life insurance will be the better option. However, there are both pros and cons associated with whole life policies. In order to ensure this is the right type of policy for you, it is important to consider both these pros and cons.
The Pros Of Whole Life Insurance Policies
- Guaranteed Coverage - Whole life insurance policies guarantee to provide coverage as long as you are alive and paying your monthly insurance premiums. This means that you will never need to worry about being denied coverage because of future health problems or because of your age.
- Consistent Rates - The rate you pay when you first take out a whole life policy is the same rate you will pay for the rest of your life. This type of guaranteed rate can be extremely beneficial in allowing you to budget your costs each month. This benefit can also save you quite a lot of money over your lifetime by allowing you to avoid the price increases which often come along with the aging process.
- Living Benefits - Whole life insurance policies not only provide a death benefit. These policies also provide living benefits. For instance, a whole life policy will build cash value that can be borrowed against in an emergency. These policies also pay dividends which can be used to offset your monthly premiums or to add a little extra cash to your bank account.
The Cons OF Whole Life Policies
- Cost - Since whole life insurance policies offer benefits that term life policies do not offer, these policies will often come with a higher monthly premium. This can be a problem for people who are struggling to fit the cost of life insurance into their monthly budget.
- Potential Fees - While whole life policies do build a cash value that you can borrow against if necessary, choosing to utilize this option will often result in additional fees. In some cases, finding alternative funding sources in a financial emergency can prove more cost-effective.
The Bottom Line
Whole life insurance policies offer guaranteed coverage for the rest of your life as long as you continue paying your premiums. This type of guaranteed coverage can provide peace of mind that term life policies do not. The cash value that whole life policies build can also prove incredibly beneficial while you are still alive. Unfortunately, these impressive benefits will come with slightly higher insurance premiums and any decision to borrow against the value of your property could result in additional fees.