How Does a Whole Life Insurance Policy Work?

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Life Insurance Policy
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How Does a Whole Life Insurance Policy Work?
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• How exactly does a whole life insurance policy
  work? Whole life policies are popular with some
  select groups of people but they are a little bit
  more complex than their plain vanilla easy to
  understand term life insurance counterparts.
• The business of insurance has to be one of the
  most underrated services offered in the United
  States nowadays. Not many people think having
  life insurance is important and because of this
  we see that the industry is not as successful as
  the auto and homeowners insurance business. It is
  important to know however, that death comes at
  any age and if a person wants to protect their
  family or other people after their death it is
  imperative for them to purchase a life insurance
  policy.
• There are two basic types of life insurance in
  the United States that work in completely
  different ways and because of this have different
  premiums. One of these types of insurances is one
  that is called a temporary policy. This policy
  covers a policyholder for about 5 to 30 years and
  their premiums are most of the time stagnant. On
  the other hand we have the permanent policy in
  which members are covered for life as long as
  they pay all their premiums. Part of your premium
  will go toward a little saving portion of the
  policy that will accumulate over time and the
  other portion of the premium goes towards the
  insurance cost of the death benefit.

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• Whole life insurance is one of the three types of
  insurance polices that you can obtain if you want
  a permanent life insurance policy. This means
  that whole life will cover you for life and that
  your cash value (saving portion) will get higher
  as time goes by. However, whole life is different
  in that your cash value is tax deferred until the
  beneficiary withdraws it and you can also borrow
  against it.
• A person should consider whole life insurance
  when the need for coverage is lifelong. Whole
  life may be used as part of your estate planning
  because it accrues money after a person pays the
  premiums, as mentioned before. Because premiums
  for this type of policy are much higher than
  those of temporary policies, a person must know
  that this is what they want after all. Whole life
  is a good choice if you want to make sure that
  your family or dependents have a good life after
  your death, and that the transition from the
  death of a person close to their lives is a close
  one.
• Within the whole life realm, there are six
  different kinds that a person can choose from.
• 1. Non-Participating Whole Life Insurance This
  type of whole life policy has a leveled premium
  and a face amount through the entire
  policyholder's life. Since the policy has fixed
  costs the premiums will not be necessary high,
  but it will no pay you any dividends after the
  policyholder dies.

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• 2. Participating Whole Life Insurance This type
  is much different from the first type mentioned.
  One of its differences is that this one does pay
  dividends and because of this premiums can be
  said to be a little bit more expensive. These
  dividends can be used to reduce your premium
  payments because they can be paid in cash, they
  can be left to accumulate at a specified rate of
  interest or they can be used to purchase
  additional insurance which in turn will increase
  the value in cash that a beneficiary will receive
  after a policyholder's death.
• 3. Level Premium Whole Life Insurance This kind
  of insurance is one that has the same premiums
  with no significant drop or rise in the money
  paid monthly through the entire life of the
  policy. At first the premiums will be enough to
  cover the services given and a little portion of
  it can be put away to cover the premiums that
  will come in later years when the cost of
  insurance in the market rises. The insurer can
  also pay extra premiums that will go toward the
  cash value part of the policy one the
  policyholder dies.

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• 4. Limited Payment Whole Life Insurance This is
  the type of policy that will allow you to only
  pay premiums over a specified period of time.
  This means that if you only want to pay premiums
  for about twenty to thirty years or up until age
  65 or 85 this is the type of policy that you
  want. Because premium payments are going to be
  paid over a specified period of time, your
  premium payments will be significantly higher,
  but after you get done with them you will be
  covered for life.
• 5. Single Premium Whole Life Insurance This type
  of policy is one that is very common for people
  that select the whole life insurance type. This
  is a limited policy with a single relatively
  large premium due at issue. Due to the fact that
  the owner of the policy will pay the single
  premium payments when the policy is first signed,
  the life insurance policy will immediately have
  cash and loan value! This type of whole term life
  insurance is mostly an investment oriented type
  than some of the others.
• 6. Indeterminate Premium Whole Life Insurance
  This is the easiest type of whole life policy to
  understand and also one of the most common ones
  in the life market. With this insurance the
  company will give you a premium based on how the
  company is doing economically and on expense
  costs. This means that while one year the
  premiums can be slightly lower than expected, in
  the next the company can charge more if they are
  not doing up to expectations. It is also good to
  note that there is a maximum guaranteed premium
  when you first sign your policy and that the life
  insurance company can never charge above the
  premium stated

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• While the cost of whole life coverage is
  substantially higher than a term life policy with
  the same death benefit it is important to keep in
  mind that the reason for the difference in price
  is that the death benefit for the whole life
  policy will almost certainly be paid out - after
  all everyone dies sometime! With the term policy
  of course the insurance company is counting on
  not paying the death benefit out on over 90 of
  the policies it issues.
• The issue of life insurance should not be taken
  lightly if one has a family or dependents. While
  some people in the United States are fed up
  paying all the different kinds of insurances and
  they figure that they don't need to pay extra for
  life insurance when they are young, it is
  important to understand that life insurance can
  be a life saver after a family member, husband or
  parent dies.
• Whole life insurance covers you for life and it
  will allow a beneficiary to continue life only
  having to cope with the issue of death and not
  having to worry about the economic hits that come
  with it. Life insurance policy are a must for
  anyone that has someone that relies on them for
  support and it's time for all responsible
  Americans to realize that.
• Source http//bit.ly/2cX3cIY

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