Importance of Taking Whole Life Insurance For Your Dependents
Whole life insurance, true to its name, is the contract that is put in place to offer protection to a policyholder during his whole lifetime.
There are however many insurance plans under the whole life insurance policy, and the earliest and the most widespread plan is the ordinary life, more formally known as the ordinary level premium whole life insurance.
It is also important to note that if referred to only as “Whole Life”, then it is common knowledge that the reference can be taken to concern the ordinary level premium whole life insurance plan.
Below are a few benefits of whole life insurance.
The basic structure of the whole life insurance policy includes the payment of a periodic premium that is fixed in amount.
The premium, to be paid, is based on the statement that the policy holder should be able to retain the policy through the lifetime insured.
The benefit, to be paid upon the death, remains stable throughout the duration of the insurance contract. The concept of levying level premiums for the duration of the cover was put in order to make the cover cost-friendly for as long as the insured decided to hold on to it.
The whole life contract’s premiums paid are accumulated and develops a cash value in a reserve. It is this accumulation that will be used to pay the death benefit of the insured.
The value of the premium paid in the initial days of the insurance cover accumulate interest and are also a reflection of the accrual that the insured needs to make to cover for the death benefit in the event of their demise.
In the absence of the cash reserve, the fixed premiums alone would not be sufficient to cater for the cost of the insurance as the insured ages.
The insurance policy also has a clause allowing the owner of the policy to take out a certain amount of money as a loan for any reasons they may have, at any point.
The insured also has to agree to pay fixed or level premiums regularly over their lifetime. Most insurance companies require that the insured pay only until the age of 100 or 95.
The insurance company will, in its part pay a fixed death benefit upon the death of the insured. There is also a cash surrender value for the policy holders who wish to stop paying the premiums and cease holding onto their policies.
Support to family
Whole life insurance policy is beneficial in cases where the policy holder happened to be the sole breadwinner to dependent family members.
In the event of his death, the death benefit can provide support to the family till they become self-supporting. Federal estates and inheritance taxes levied by the state, funeral and administration expenses are also covered by the insurance policy.
The other benefits of this cover are that it can take care of the deceased’s business interests such as indemnifying a business after the demise of key employer.
This can also extend to hiring more key employees in their place and also offer a source of finance for a company’s salary continuation plan. Business interests of children and grandchildren in the form of capital bequests are also taken care of.