A Whole Life Insurance Policy Provides Certainty; Here's When Selecting A Permanent Policy Over A Term Policy Makes Sense
While it has become popular for financial advisors to warn their clients about whole life insurance policies, instead advising them to purchase a term life insurance policy and invest the difference in premiums, this can be a risky venture. It is true that premiums for whole life insurance policies are much higher than premiums for term life insurance policies; however, the reason for this is that whole life insurance policies guarantee payout of your death benefit as long as you continue paying your premiums. They're also not affected by market volatility like other investments; as long as you do not withdraw or borrow against the cash value of your life insurance policy, it can only increase and will never decrease. The premium you pay for your policy will not change and you will not have to renew your coverage like with a term life insurance policy. This makes it an excellent choice for people who need certainty in their life insurance coverage. Here are a few situations in which purchasing whole life insurance is the better option.
You Have A Special Needs Trust
If you are currently providing full financial support to a family member with special needs who is incapable of maintaining a comfortable level of income on his or her own, you will want to purchase a whole life insurance policy and speak with a financial advisor to set up a special needs trust. After your death, your life insurance benefit (either a portion of it or the entirety of it) will be given to the special needs trust to be disbursed to your family member on a regular basis, providing a comfortable level of income for him or her to live on.
You Want To Avoid Beneficiaries Paying Taxes
If your estate is worth a large amount of money and will be subject to federal estate taxes after your death, purchasing whole life insurance is a great way to protect the integrity of your estate. Your insurance benefit can be used to pay down estate taxes after your death, and any amount paid directly to beneficiaries is not taxed at all. Without a whole life insurance policy, the inheritors of your estate may be forced to liquidate parts of your estate in order to pay the estate taxes; they may be forced to sell your property, vehicles, family heirlooms, or other items in your estate. If you want to ensure that all of your property will go to your kin after you pass away, a whole life insurance policy is a great source of protection.
You Are Worried About Potential Health Issues Later In Life
If your family has a number of medical conditions that are strongly hereditary, you may be worried about what your health status will be in your old age. Term life insurance covers you for a predefined period of time; the policy will either cover you for a set number of years or up until a certain age, where it will expire. This means you will have to renew your term life insurance policy if you want to continue your life insurance coverage. If you are in poor health, your premiums for a new term life insurance policy can end up being astronomical or you may be denied coverage altogether. This can result in you quickly draining all of your retirement funds paying premiums for a new term life insurance policy. Purchasing a whole life insurance policy protects you from this and keeps the premiums you pay constant throughout your entire life, making it easier to plan for retirement and ensuring your continued coverage.