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Whole Life Insurance: How Does It Work Exactly?

Updated: July 1, 2018

People are always told they should get whole life insurance, but few individuals have a proper understanding of these policies.

It is difficult to find the best whole life insurance policy if you are unaware of its many benefits.

Whole life insurance is a great way to provide financial security for your spouse, children or other loved ones in the event of your passing.

Instead of having your dependents worry about funeral expenses and bills when you die, whole life insurance has them covered.

Individuals must often decide between getting a whole life or term life insurance policy.

What is Whole Life Insurance?

Whole life insurance is a type of insurance policy offered by companies to individuals where the benefit is active until the policyholder passes away. This is one of the best ways to provide protection for a spouse, child or loved one if you are worried about how they will survive without you.

It is possible to get great rates for whole life insurance, as long as you plan your policy decisions ahead of time.

Most families still have one individual who is responsible for earning money, which pays for rent, food and other expenses. If this individual passes away, their spouse and children may struggle to stay financially afloat.

While savings can help, whole life insurance is the only way to have peace of mind that your dependents are protected in the event of your death. This policy will never expire, which means you are guaranteed to give them this benefit as long as you keep paying your premiums.

It is possible to get great rates for whole life insurance, as long as you plan your policy decisions ahead of time.

Individuals who receive whole life insurance coverage at a young age will pay much lower premiums than those who get coverage when they are 60 or older.

How Does Whole Life Insurance Differ from Term Life Insurance?

It is important to understand the differences between whole life insurance and term life insurance. While whole life insurance never expires, term life insurance is only for a set period of time.

It makes a lot more sense for people to get a whole life insurance policy, because they no longer have to worry about the policy expiring at a certain point of time.

If someone gets a term life insurance policy, their insurance is no longer active after the policy’s term comes to an end. Most term life policies come with a term of ten years. While it is not difficult to get a term life insurance policy renewed, it often comes with higher premiums as you get older.

It makes a lot more sense for people to get a whole life insurance policy, because they no longer have to worry about the policy expiring at a certain point of time.

But there are financial advantages to term life policies, especially if you are unable to afford the premiums quoted by whole life providers.

It is better to have a term life policy that you can pay comfortably, instead of shooting for a whole life policy that troubles your finances.

Is it Cheaper to Get Term Life or Whole Life Insurance?

The question about cost when it comes to term or whole life insurance is a complicated one. In most cases, term life insurance is cheaper. But this is not always true, especially if we look at the average costs of insurance.

This means a person who lives a long life and gets whole life insurance at a young age may save money as compared to those who get term life insurance.

Let us take a person who starts getting term life insurance when they are 30. If we compare their premiums from 30 to 55, they are going to pay less for term life than they would for whole life insurance.

But when the individual in question turns 55 or 60, they will face higher premiums with term life insurance, because they are probably less healthy and have some pre-existing conditions that put them in a higher risk category.

In contrast, their whole life insurance premiums would have remained constant. This means a person who lives a long life and gets whole life insurance at a young age may save money as compared to those who get term life insurance.

But individuals who are older will probably opt for term life insurance, because it is going to cost them less money.

How to Find the Best Life Insurance for Seniors?

Finding the best insurance for seniors is not an easy task. Seniors are often going to have pre-existing conditions, such as long-term illnesses. This puts insurance companies on alert and often results in very high premiums for whole life insurance.

Make a list of all the best companies in your area and attempt to find life insurance quotes from these companies.

This is why seniors will often opt for term life insurance. Not only is it cheaper, but it is not unreasonable to assume a senior individual with health problems may not live beyond the term of this policy. Getting a ten-year term life insurance policy is still a great way for a senior to provide for their spouse and/or children.

It is important to shop around if you are a senior who needs life insurance. Make a list of all the best companies in your area and attempt to find life insurance quotes from these companies.

Having options will make it a lot easier to choose the policy with the best price to benefits ratio.

Seniors who have health problems will have to accept that they will pay more for insurance than someone who is only 40 years old and is in perfect health.

Getting Individual Whole Life Insurance from a Reputable Company

Whether you are 30 years old and looking for your first policy, or a senior who wants life insurance, you must understand the importance of the company you choose for a policy.

If you want to save money on whole life insurance, get a policy as quickly as possible. The younger you get insured, the lower your premium rates.

Picking the right company is equally as important as finding the right type of whole life or term life insurance policy. A reputable company will offer better deals, better coverage, great customer service and a guarantee you will get your beneficiaries will get the principal benefit amount when you die.

In contrast, newer companies are less reliable, have poor customer service and cannot offer the same guarantees that your policy will remain active until your death.

If you want to save money on whole life insurance, get a policy as quickly as possible. The younger you get insured, the lower your premium rates. This will prevent you from having to consider less reputable companies to save money.

Getting a policy at a younger age also gives you more time to benefit from the cash value of the policy, which continues to grow thanks to interest on the principal amount.