Are you looking for life insurance coverage but don't know what to start? Here's what to know when buying whole life insurance.
Personal Finance

A Short Introduction to Buying Whole Life Insurance

Car insurance, medical insurance… These unavoidable expenses are an accepted part of life. Life insurance, however, is not nearly as accepted. In fact, only 54% of Americans have life insurance at all. That is far below the rates of medically insured and driving insured Americans. 

At a certain age, it’s time to start looking into buying whole life insurance. No one expects kids in their twenties to start a new life insurance policy but, as you age, it becomes more relevant. It’s like a middle-age right of passage. 

To find out more about whole life insurance, check out the guide below. 

What Is Whole Life Insurance?

Insurance as a general concept is simply a contract between a policyholder and the insurance company, where the policyholder pays money to the company in case of unforeseen problems, at which time the company will cover some of the costs of those problems. The insurance policy dictates exactly how much and on what terms the money will be dispersed.

Whole life insurance is a specific type of life insurance that covers the policyholder for their entire life, as long as they continue paying their premiums.

How Is It Different?

Whole life insurance is not the only type of life insurance. The other major category of life insurance is term life insurance. The main difference between whole life insurance and term life insurance is that term life does not cover the policyholder’s entire life. It only covers a term of anywhere from 5 to 30 years.

Types of Whole Life Insurance

There are many different types of whole life insurance to research, including:

  • Variable
  • Modified
  • Reduced
  • Simplified
  • Indexed
  • Guaranteed
  • Limited
  • Single-premium
  • Children’s
  • MEC

Some policies even pay dividends, and these are known as participating and non-participating policies.

How Much Does It Cost?

As expected, whole term life insurance is usually more expensive than term life insurance because the coverage is typically for a longer period of time. Of course, the cost mostly depends on the age of the policyholder and their general health — two major factors in the insurance company’s risk. The insurance companies hope that a policyholder will be able to pay their premiums for a long time before they have to payout.

Although whole life insurance tends to be more expensive, some term life insurance policies have the option to convert to whole life insurance later on. 

Who Needs It?

Those with a family to support, a high-risk job, or extreme hobbies should seriously consider investing in a whole life insurance policy while they’re still relatively young. Not only is the cost of a funeral exorbitant nowadays, but children, spouses, and aged parents left behind will need help adjusting to the missing income.

Buying Whole Life Insurance

Anyone with a family to provide for should look into buying whole life insurance. Ideally, a policyholder will begin before their age is too advanced, as it may increase the financial burden. There are also many different types of whole life insurance to investigate, which will take some time.

For more useful finance guides like this one, take a moment to browse our page. 

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