| Whole Life Insurance |  |
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| Whole Life Insurance |
Whole Life Insurance may be called straight life, ordinary life, or
permanent insurance. Whole Life Insurance covers you for as long as you
live, as long as you pay the premiums. There is no need to renew Whole
Life policies.
In order to buy Whole Life Insurance you will usually have to fill out a
health questionnaire, and you may need to have a medical exam. Depending
on the medical information you provide, your premiums may be higher than
the standard rate, or the insurance company may decide not to offer you a
life insurance policy.
It is important to be very honest about any medical conditions which could
affect your life insurance. Your beneficiaries might receive no benefit at
all if you die within two years of buying the policy and you have not told
the truth about a situation or medical condition which would have caused
the company to deny you insurance if they had known the truth.
With a Whole Life Insurance policy, you generally pay the same amount in
premiums for as long as you live. This premium is based on your age and
your health at the time of purchase. In some cases, the premium you pay
may change over time, but you would be shown this when you first buy the
policy. Be sure you understand what your premium payments will be and that
you can afford them over time.
In the early years of the policy, premiums for Whole Life Insurance may be
much higher than you would pay for the same amount of Term Life Insurance.
But remember, the premiums in most term policies will rise each time you
renew.
Many Whole Life Insurance policies also earn dividends, usually on an
annual basis. If you do not take the dividends out when they are earned,
but instead leave them on account with the insurance company, the
dividends will also earn interest.
If a company pays dividends, it may pay more or less in dividends than it
had been paying when you bought the policy. The dividends a company will
pay depend on many factors, including the performance of their own
investments and the efficiency of their operations. The company's earnings
and expenses can fluctuate just like the stock market. When you are
choosing an insurance company that pays dividends, ask for a company's
history of projected dividends versus paid dividends. Remember that
dividends are not guaranteed and may differ from those shown in sales
illustrations.
Sometimes, dividends may be used to purchase Paid-Up
Additions (PUA's) to your policy, an increase to the death benefit.
Some companies will use the dividends on your policy to buy additional
Term Life Insurance. But, you might have less insurance than you planned
if the dividends go down and these additions did not supplement your
benefits.
In recent years, many consumers were told that dividends their policies
earned, and the interest on those dividends might, or would, become large
enough to pay the premium payments. (This is sometimes called "abbreviated
payment," or "vanishing premium.")
But, often this didn't happen and those consumers were stuck paying for
insurance they couldn't afford. Or, they lost their insurance plus all the
money they had paid in.
If you decide to buy a policy which has an abbreviated payment or
vanishing premium option, you should keep close track of your policy's
earnings. Changes in interest rates, cost of insurance, policy expenses
and loans can quickly eliminate your policy's ability to pay for itself.
Even if you can stop paying premiums at some point, you might have to
start paying again at some later point.
Unless the insurance company guarantees in writing that you will no
longer have to pay premiums after a certain time, you should assume you
will have to continue to pay. |
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Source: Massachusetts Department of Insurance
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For information about Lynch Insurance please contact:
William Lynch |
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