As you start to get a little older, the reality that you need to help your loved ones after you pass starts to become clearer.
We often think of life insurance as just being a way to support those we love in the event of an untimely death, but the fact is that there are multiple forms of life insurance, and they can actually work to diversify your portfolio in addition to helping your loved ones.
We’re going to discuss the pros and cons of whole life insurance in this article, giving you a look at what it is and how it might fit into your financial scheme.
The Pros and Cons of Whole Life Insurance
Most term life insurance plans just payout to your family members for a certain amount of time or if you pass within the term that you’re covered for. Alternatively, whole life insurance gives you coverage for your whole life, and the premiums that you pay in go into a high-interest savings account that you can use for your retirement.
In this way, the insurance becomes a life insurance retirement plan, also known as a LIRP.
Pros of Whole Life Insurance
Naturally, the two dominant advantages of whole life insurance are that the plans cover you for your entire life and that you can actually accumulate wealth through your contributions.
Term life insurance might not give you any actual benefit if you don’t pass during your period of coverage, and the premiums you pay may not be able to be used by you or your family if the timing doesn’t work out correctly.
Cons of Whole Life Insurance
The disadvantage of whole life insurance is that it’s more expensive than term insurance because it offers such significant benefits. The flip side to that is that you’re actually saving the money you put in, but you may not be able to afford those contributions in the earlier part of your life.
If you fall onto hard times and have to access the money you’ve contributed, you may face serious tax penalties and other disincentives that could be damaging.
This is why many people opt for term life insurance, even though it’s the inferior option in the long run. Term payments are lower, and they give you the assurance that your family will be supported in the event of your passing.
Before you make any decisions, it’s important to talk with a financial planner or professional who can look at your financial situation and tell you what you could afford. There may be whole life insurance plans that fit your budget and would offer far more long-term support than a similarly-priced term plan.
Need More Financial Planning Information?
Hopefully, our look at the main pros and cons of whole life insurance was helpful to you as you start to take your next steps toward planning for the future. If you need some more information, though, we’re here to help.
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