What Is Life Insurance?
Whole life insurance policies are a popular type of permanent life insurance that gives your family (or anyone else of your choosing) a death benefit upon your death. Essentially, a whole life insurance policy covers you for your entire lifetime (as long as the premiums are paid) and provides cash values which you can take advantage of, borrow from, or even invest in. If you are planning to purchase a whole life insurance policy, there are a few things you should know before you go through the policy signing procedure, researching the providers, and most importantly, your goals and needs. By making sure that all of these areas are covered, you will be ensuring that your new insurance policy will fit your desired goals for your whole life.
To learn more about this provider, check out our full review of J.D. Powers and Associates. J.D. Powers and Associates is a company that conducts a yearly study on different aspects of life insurance to come up with the best financial rating for all of the providers available today.
You should know exactly what type of whole life insurance you are looking for, because different providers offer different features. Some policies provide a cash value or replacement value, while others base the return of investment partially off of the premiums paid by the policyholder. Other providers base their returns on the age of the policyholder and the total premiums paid over the years. Before you go through the policyholders with their premiums, it is important to understand how their policies affect the return on investment, because the rates for the cash value or replacement value may vary greatly between different providers. You can learn more about these factors from the J.D. Powers and Associates website.
Whole life insurance premiums are extremely variable, which is why many people think they are more expensive. Many individuals falsely believe that the younger they are when they first purchase a policy, the lower premiums will be. This simply is not true. If a young person has an accident within the first few years of coverage, however, the rates immediately skyrocket and he could end up paying much more than he would if he waited until he was older. Young people who are planning to quit their jobs soon should also consider the fact that quitting could cause them to forfeit some or all death benefits, depending on their age, which could push the price even higher.
Whole life insurance companies also differ in how they set number and dollar limit limits for the death benefit. Most set the maximum amount for the death benefit at 100%. This means that they will payout the death benefit only to the extent that is required. This maximum dollar amount also determines how much the premiums will be.
Another factor that insurance companies use when setting the premiums is what is known as level premium. In whole life insurance companies, they will base premium payments on an average lifespan. They do this by assuming that each individual will live a specific amount of time, regardless of age. Insurance companies believe that the only reason an individual would die suddenly would be if they had an ailment that was terminal, meaning that there was no cure, no hope, and no one around to help them. Once they reach this level of expectancy, the insurance company will then charge the insured a set premium amount, regardless of his or her age. For instance, if a person is expected to live forty years, they will be charged a rate that reflects their expectancy.
The best whole life insurance companies have fixed premiums that do not fluctuate as premiums do from year to year. In addition, the best companies also have an inflation factor, which is their way of protecting their investments. If the cost of living increases, so does the premiums, which helps them to ensure that their investments do not lose value. In addition to the fixed premiums and the inflation factor, they also have a customer complaint ratio, which is how many complaints they have received during a year as compared to how many were raised.
A policyholder pays a premium for the death benefit and can also elect to include a savings component to the policy. With this feature, the insured can choose to have either a lump sum paid out upon death, or a saving element built up over time. The best whole life insurance companies usually allow these two components to be worked with, but it is always wise to read all terms and conditions of the policy before choosing to purchase it. Whole life policies are great ways to protect one’s family’s future and provide financial security for the beneficiary or beneficiaries.