The idea behind whole life or whole-of-life insurance is that the policy pays out a lump sum to your dependents when you pass away. The main advantage of taking out a whole life insurance policy is that it lasts as long as you do, and does not require renewal at any stage. You simply pay a monthly premium. When you die, your loved ones will receive the pay-out.
With a whole life insurance policy, you’ll receive a contract that includes premiums for insurance and investment components, protecting you for your entire life. Upon death, your loves ones will receive a predetermined amount.
WHOLE LIFE INSURANCE
HOW DOES WHOLE LIFE INSURANCE WORK?
You can choose to purchase a whole-of-life plan and then pay in monthly or annual installments, or elect to pay a one-off sum. You may have the option to add extra insurance against certain illnesses, or becoming disabled.
The money you pay is then split. Some of the amount is used to buy your life assurance, and the rest is invested in an investment fund. Your policy should have regular review dates.
WHY DO YOU NEED WHOLE LIFE INSURANCE?
Whole life insurance may work for you if you know you want to provide a cash pay-out for dependents after your death, in order to keep them financially stable, particularly where you have been the breadwinner. Whole life insurance often has the advantage of paying out a higher amount for your dependents, because it links life assurance with investment, although the final amount will depend on how well the investment performed.
As an individual with whole life insurance, you can borrow against or withdraw accumulated cash value, if you need to. You may also use a whole life insurance policy to liquidate business debts.