What does actually Whole Life Insurance Policy mean. If i

what does whole life insurance mean

buy a whole life insurance. Show More

buy a whole life insurance policy today. will i keep paying premium for rest of my life or there will be a fixed period like 5 yrs or 10 yrs till then i will only need to pay premium and after that the policy will continue till my death free of cost without paying any premium ?

(1) What will happen if i want to discontinue my whole life insurance policy in between like after 3 or 4 yrs due to any reason ?

winktax.

A term life insurance policy is a policy whose premium payment puts the life insurance policy in force for a period of time. One year premium, one year of coverage. A whole life insurance policy is basically an enhanced type of term insurance. The premium cost for a whole life insurance policy is more than the cost of the life insurance. This extra cost goes into a side savings account inside the insurance policy. This side savings account is called cash value. The design of the a whole policy is to charge more premium in the early years when the cost of insurance is low, and then to build up cash value which will be used to cover the cost of insurance in later years when the cost of insurance is higher. In this way a whole life policy can become a form of permanent insurance.

winktax.

Whole life insurance policies are designed to have premiums paid until a certain age, at which time the policy becomes paid up. ie. there is enough cash value to keep the policy in force until death.

winktax.

The most common age for a paid up policy is age 62 or 65. A whole life policy can be made rich, which means it can be designed for higher than normal premium payments which results in a faster cash value build up and an earlier date to reach paid up status. The IRS has rules regarding how much extra can be paid in.

winktax.

If one discontinues a policy, one has several options. If cash value has accumulated, then one can leave the policy in force and it will continue for a period of time during which the cash value pays the insurance cost. Or one can end, cash out the policy, ie. end the insurance, receive the cash value remaining back.

winktax.

Depending on age and health, it is possible to purchase a whole life insurance policy for less than $600 per year. the premium is based on age/health and amount of insurance. The lower the face amount of insurance, the lower the premium.

winktax.

Term insurance - it is possible to purchase a policy for less than $120 per year, however at this level regardless of age/health the face amount of insurance would be very low. All term insurance have policy fees, most policy fees are on average $40 to $60 per year, at the low end this leaves little for insurance costs. Term insurance can be purchased are ART - annually renewable term (premium changes each year), and can be purchased with a time guarantee, the guarantee is for the premium, the premium will remain level for a period of time, common time periods are 5 year, 10 year, 15 year, and 20 year. each increase would cost a little more. A 100k 5 year term policy might cost 200, a 100k 10 year term policy might cost 225 per year.

winktax.

All term insurance can be purchased with a guaranteed renewable, however the policies are priced such that almost no one would renew at the guaranteed rate unless they were actually close to death. ie. a 20 year term policy at 100k for $300 per year can be renewable in the 21st year, but the cost might be $2,500 per year and go up each year.

winktax.

I hope this answers your question, please click the accept button. Otherwise please provide more details so that I can provide a more specific answer. Thank You.

Customer:

Suppose if i buy a 10-year whole life policy. does it mean i will pay premium only till 10 yr and there after it will become paid up policy andi will not need pay any premium

winktax.

Whole life is also known as a type of Permanent insurance.

winktax.

If you purchase a whole life policy that becomes paid up after 10 years, then at that time the policy will remain in force until death with no requirement to pay more premiums.

Customer:

so like after 10 yrs. my cash value is $10,000. Now can i withdraw whole $10,000 and my policy will continue or i can only partially withdraw

winktax.

The cash value is designed to pay the cost of the insurance, if the cash value is withdrawn to zero then the policy will end. Most insurance policies will allow one to borrow out a portion of the cash value. However when one borrows out cash value, one is required to pay interest on the policy loan, the interest in effect is going back to the policy.

Customer:

so u mean i can take loan like 80% of cash value of my policy and will pay interest on that. right. and will i be needed tp return the loan amount to continue my policy ?

Customer:

like i took $8000 on loan from my $10,000 cash value

winktax.

Yes, at some point however the cash value needs to be paid back, policy loans are designed as a temporary deal, not a permanent situation.

Customer:

what will be the growth of my cash value of policy if i leave whole amount as it is in policy or if i take 80% of cash value ofmy policy

winktax.

A whole life policy is not designed to be an investment, the cash value account grows like a bank savings account, maybe 1% to 3% per year.

Customer:

Whether i leave whole amount as it is in policy or i take 80% of cash value of my policy. why will i not be needed to pay per month premium to keep it active till my death. or my cash value will go on decreasing month by month as im not paying premium any more

winktax.

At some point the policy will reach the end point. Lower cash value makes that happen sooner. The policy as it was designed to begin with was designed with the goal that cash value is there in later years to pay the cost of insurance, to keep the policy in force until death, permanent. by taking out the cash value you are breaking the design at some point. Each policy will have a different time period until it implodes.

Customer:

Why People take whole life policy if at the time of need. a person can not get his saving back but can take loan and loan can be taken from anywhere. why whole life policy

winktax.

Cash value in a whole life policy is a form of an asset, it is your money, people borrow from life insurance policies for many reasons, but the primary reason is they still want the life insurance. One can always cash out the policy and take the cash, but no more insurance.

Customer:

then i dont think any good reason of having whole life insurance. its better to have Term Life with so cheap rates if my aim is only insurance. am i right ?

winktax.

Yes that is true. Term insurance was invented on the concept of, buy term (its cheaper) and invest the difference (better returns than a whole life policy). The problem with the concept is that most people never did the second part and could not afford the insurance later in life when it cost more, they did not save.

Customer:

Please tell me if i reached 10 yr paidup value of whole life policy and cah value is $10,000. now if i dies after 1 year. so what will my nominee get ?

winktax.

If you purchased a $50,000 whole life policy that was paid up in 10 years with a cash value of 10,000. the beneficiary would receive $50,000 at death. if one borrowed out 8,000, the beneficiary would receive $42,000 (loan is paid back).

ok. so basically my cash value is of no use neither for me and for my nominee after my death. it is just the cost of insurance. right ?

yes, it is for the future cost of insurance, if you no longer need the life insurance, you would get your cash value back.

Source: www.justanswer.com

Category: Insurance

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