4 Extra Benefits of Whole Life Insurance

If you understand the differences between term and whole life insurance, then you might already know the main advantage of taking out a whole life policy. Unlike term insurance, which has an end date, a whole life policy gives you insurance protection until you die.

However, whole life insurance is more complex than this. This coverage has some additional benefits that you might not be aware of yet. Read on to learn more about these benefits and how they might make whole life insurance a better choice for you and your family. 

1. You Have More Payment Flexibility

Many people pay set life insurance premiums. For example, if you buy a term policy, then you might pay monthly, quarterly, bi-annually, or annually. Your premium charges are fixed no matter which payment schedule you use. The only choice you have is when you make your payments.

Whole life insurance payments are often more flexible. You get more control over how you fund your policy. So while you can stick to a traditional schedule, you might also be able to use different types of payment processes.

For example, if you have significant savings or have inherited some money, then you could buy whole life coverage upfront. You make one payment to buy the policy and don't have to worry about funding it after that point.

Or you can set up limited payment plans. Here, you pay premiums for a set number of years. Once you reach the end of this period, your policy stays in place, but you don't have to make any more payments. This is a useful option if you have good levels of disposable income right now or want to save future income for different needs.

Whole life insurers might also allow you to modify premium payments over time. For example, you might pay low premiums at the start; these costs then increase at a pre-agreed point, say a few years down the line. This is a good option if you need to save money now but know that you will have more disposable income later.

2. Your Policy Can Have a Useful Cash Value

With term life coverage, your family will get a useful payment if you die while your policy is active. However, this insurance doesn't typically have any other financial value. On the other hand, whole life policies can build cash value as well as covering death benefits.

If you buy a policy with a cash accumulation component, then some of your premium payments go into a cash value account. Once your cash value builds, you can choose to access it before you die.

For example, you might be able to:

• Use your accumulated cash value as collateral against a loan from your insurer.
• Withdraw cash to pay for other things such as college costs.
• Use your cash value to fund your premium payments.
• Get some cash back if you decide you no longer need coverage and want to surrender your policy.

While withdrawing cash from your policy needs careful management, it can make your coverage more financially useful once it builds up some value.

3. You Can Earn Extra Dividends

Whole life insurance policies also sometimes make dividend payments. Known as participating policies, these products potentially give you useful financial bonuses on top of cash value accumulation and death benefits.

These payments aren't guaranteed; however, insurers might make them when they have profit surpluses. This is like earning money on investments. Depending on your insurance company's rules, you can take dividend bonuses as a cash payment. Or you can use it to increase your cash value account.

Some people use these bonuses to pay for some future premiums so that they can stop making out-of-pocket payments, at least for a while. Some insurers also let you use dividend payments to increase your policy coverage.

4. You Get Consistent Coverage

If you use term life insurance, then you lose your insurance once the policy expires. While you can take out another policy at this time, you aren't likely to get the same terms.

You'll be older, and your health might not be the same as when you took out your original life insurance. You might not get such good terms, and your premium rate is likely to be higher.

One of the benefits of whole life coverage is continuity of coverage. Insurers have to stick with the terms of your original contract as long as you meet their terms and conditions. You don't have to worry about changing insurance providers as you get older. You won't have to buy a new policy at increased rates. Your coverage will automatically cover any changes to your health.

It's important to take time and get professional advice before you choose which type of life insurance to buy. To get expert advice on your options and to learn more about whole life coverage, contact Illinois Insurance Center. We've helped people in Illinois find the best life insurance solutions at the best rates since 1973. You can trust us to ensure that you and your family have protection for your current and future needs.