A whole life insurance policy protects against the risk of death for the insured’s entire life; and has a savings account attached. The insurer invests a part of each premium paid into a life fund, on the insured’s behalf. This accumulates a cash value, which may be borrowed by the policyholder. Withdrawing from the savings account will reduce the death benefit; however there is an option to repay funds borrowed. A whole life policy will remain in force until:
- Death of the insured. In this case the beneficiaries will receive the death benefit (the face value of the policy).
- Non-payment of premiums will cause the policy to expire.
- Surrender of the policy. In this case the policy holder will receive the surrender value (cash value less any surrender charge).
- The policy matures when the insured reaches 100 years of age and they will receive the cash value.
A whole life policy is an expensive option. Consumers who seek cheap ‘pure’ life insurance are best advised to opt for a term policy. For those who decide upon whole life there are some important factors to consider. Such a policy is intended foremost as a long term life assurance product, with the added benefit of a savings plan. It is not intended as a sole investment fund. The rate of return on the investment part of the policy is not guaranteed and other savings options often offer better rates.
Whole life insurance policy provides long term cover with the added benefit of a growing cash sum. However, such a policy isn’t suited to all. Protected.co.uk is a good place to find latest insurance articles and news updates plus a good place to compare life insurance quotes too.