A whole life policy is a type of permanent life insurance that offers lifelong protection and provides a guaranteed annual return on your premiums. Unlike term life insurance, which only provides coverage for a pre-determined length of time, whole life insurance remains in effect for your entire lifetime, provided you pay the premiums.
How does a whole life policy work?
Purchase - First, you purchase a whole life policy through a life insurance company.
Premiums - You pay premiums for your policy in exchange for life insurance coverage. The premiums can either be level or may increase annually.
Guaranteed cash value - Your policy will also accumulate a guaranteed cash value. This is essentially a savings account that grows on a tax-deferred basis, which you can spend, borrow or access as needed.
Death benefit - If you pass away while your policy is in effect, your policy will pay out the death benefit to the beneficiaries you've named in your policy. This is usually a lump sum payment that is tax-free.
Living benefits - Whole life policies are also designed to provide living benefits. Depending on the policy, you may be able to access the cash value as needed for various purposes, such as health expenses, retirement income or college tuition for your children.
Whole life insurance is a great option for those who want to provide lifelong protection for their families. It can provide both a death benefit to your loved ones and living benefits and cash value for you and your family. For more information, please visit https://blog.brighthousefinancial.com/the-difference-between-term-and-whole-life-insurance.
