How to buy whole life insurance
If you have a family, you want to protect them at all costs. You want to drive the safest car and buy a home in the safest neighborhood. But what are you doing to ensure their financial safety?
Life insurance is one of the best ways to secure your family's future, but choosing the right type and deciding how much to purchase can be confusing. Read below to learn more about how whole life insurance works and how to buy a policy.
If you're in the market for life insurance then you can start by getting a free price quote so you know exactly what to expect.
What is whole life insurance?
Whole life insurance is a type of permanent insurance policy with two components: a death benefit and a cash value. The death benefit is the amount your beneficiaries will receive if you pass away while the policy is active.
The cash value is an amount that builds up in the policy over time. It usually takes years to accrue a substantial amount of cash value. Once you have a decent cash value, however, you can withdraw it or borrow against it. Some consumers use the cash value for emergency expenses. It can also be used to pay off debt, make household repairs or many other things.
How to buy whole life insurance
The first step is deciding how much life insurance you need to buy. Whole life insurance is usually sold in $50,000 or $100,000 increments, depending on the company. For example, if you need $325,000 in coverage, you will usually have to choose between a $300,000 or a $350,000 policy.
After you decide on the policy amount, you can apply for coverage. A life insurance application will include demographic, medical and lifestyle questions. After you submit the application, the insurance company will conduct its own investigation to verify your medical records.
Once the investigation is complete, the insurance company will approve, deny, delay or counteroffer your request. If you are approved, you will have a firm deadline to activate the policy and start making payments.
A policy may be denied if you have extensive underlying health conditions or lifestyle choices that are a red flag for the insurance company. For example, if you're currently receiving cancer treatment or frequently go skydiving, your application may be rejected.
If your request is delayed, the insurance company may postpone approval until a certain time. This usually happens if you have surgery or another medical procedure scheduled. After that event occurs, you can request for the insurance company to review your application again.
"Counteroffer means they probably found something they didn't like and are modifying the application," said financial planner Dustin G. Suttle, CFP of Suttle Crossland Wealth Advisors. "This may mean increasing premiums, decreasing face value or adding exclusions, such as an aviation exclusion for private pilots."
You can get a free price quote online now to see what you're eligible for or you can use the table below to start comparing providers.
Who needs whole life insurance?
Individuals who want to leave behind a legacy to their family can purchase whole life insurance. Wealthy families who are worried about estate taxes often buy a policy to protect their beneficiaries. This mostly applies if you are gifting assets that are hard to sell but will result in estate taxes.
"You can use the death benefit proceeds from life insurance to avoid having to sell any ownership of that asset or other assets," said financial planner Kevin Lao, CFP of Imagine Financial Security, LLC.
Many people choose to buy term life coverage instead of whole because their family's financial needs will decrease as they get older. But that isn't true for everyone. For example, if your spouse has a pension that will end when they die - and you rely on that pension to cover your expenses in retirement - you may need a whole life policy instead of a term policy.
Some parents buy a whole life policy for their children when they're born just in case they develop a serious illness or condition later on that will make them uninsurable.
