What to Look for When Planning to Buy a Whole Life Policy?

Choosing the right life insurance policy is no simple task. We’ve taken the advice of seasoned life insurance professionals like Sim Gakhar to clarify what you should look for when planning to buy a whole life policy in Canada.

Whole life insurance offers many benefits, but that doesn’t mean it’s the best option for everyone. Browse this article to learn what whole life insurance includes, what aspects of it you need to consider when purchasing a policy, and what alternatives you can find to whole life insurance.

Defining Whole Life Insurance

Whole life insurance is one type of permanent life insurance that provides coverage throughout the policyholder’s life. Whole life includes the death benefit for beneficiaries as well as a cash value aspect within the policy. Some whole life policies also include dividend payouts to policyholders, although these payments are not guaranteed.

Premium payments on whole life insurance are fixed throughout the policy, meaning you won’t incur unexpected charges within your policy. Although these payments tend to be higher than term life insurance, the payments remain the same and guarantee your benefits until death.

The death benefit of whole life insurance is also guaranteed so long as you fulfill your premium requirements and don’t permanently withdraw your cash value.

Whole Life Aspects to Consider

When looking for a whole life insurance policy, you should consider each policy’s cash value, death benefit, costs, and options to surrender. These aspects will affect your premium, beneficiaries, benefits, and your finances while living.

Cash Value

Whole life insurance distinguishes itself from term life insurance through its permanency and cash value. The cash value is a fund that accumulates from a portion of each of your monthly payments towards the premium. These funds are set aside and grow, often tax-deferred, over time as a financial cushion for the policyholder.

Cash values are not normally paid out to beneficiaries; they can instead be used to withdraw or borrow against while the policyholder is living. This withdrawal of cash value or policy loan should be repaid in full to avoid deductions from the death benefit.

When looking at the cash value of a potential whole life insurance policy, you’ll want to analyze the following:

If there is a guaranteed rate of return
What the interest rate is on a policy loan taken out from cash value
The ramifications of accessing your cash value

Death Benefit

The primary purpose of life insurance is to ensure that your beneficiaries are financially secure upon your passing. The death benefit is the amount paid out to your beneficiaries by the insurance policy when that occurs.

Things to consider when choosing your whole life policy around the death benefit are:

How much you want to leave to your beneficiaries
How many beneficiaries you can/want to have
If you want to designate contingent beneficiaries

Contingent beneficiaries are “plan B” beneficiaries whom you designate in the case that your original beneficiaries are no longer alive at the time of your death.

Costs

Life insurance benefits are often used to cover the funeral costs and outstanding debts of the policyholder. While it is a smart decision to protect your loved ones financially upon your passing, it doesn’t make sense to pay more for life insurance than you can afford – after all, that is just adding on debt that your loved ones may fall responsible for.

Make sure you ask Sim Gakhar for a comprehensive list of all costs involved with your new life insurance plan. You’ll want to know the amount of your total premium and monthly payments, plus any fees you may incur for future changes in your policy or health.

Option to Surrender

Sometimes an individual will take out a whole life insurance policy and later decide to “surrender”, or terminate that policy for one reason or another. While this may not be your plan, life circumstances can change, so make sure to ask Sim if your policy includes:

Cash value surrender
Reduced paid-up life insurance
Extended term life insurance (if you’re converting from term to whole) or
1035 exchange

Each of these caveats is an alternative to stopping your payments altogether if you later decide against continuing your policy. Talk each through with your qualified insurance agent for more details.

Alternatives to Whole Life Insurance

Like any policy type, whole life insurance also includes some downfalls. Its premiums may be unaffordable for some people, dividend changes are not disclosed, there are high surrender fees for terminating a policy, and you may pay for your policy longer than you initially expected.

Sometimes individuals mistakenly use “whole life insurance” to describe all types of permanent life insurance policies; however, there are some permanent insurance types that are not whole life insurance. Be sure to investigate these options to see if they may better suit your needs over whole life insurance.

Universal life insurance: Universal life insurance is typically more flexible than whole life, as policyholders have more of a say over their investment mix.
Survivorship life insurance: Survivorship life insurance covers two policyholders, paying out benefits after the death of the second policyholder.
Variable life insurance: Variable insurance policies allow most of the premiums to be put into an investment account. They also offer fixed or variable death benefit options.

If one of these alternative permanent life insurance policies sounds like something you’re looking for, contact life insurance agent Sim Gakhar for more information. She is ready and willing to provide you with all of the answers you’re looking for to find the ideal policy for your situation.

Is Whole Life Insurance Right for You?

If you are looking for permanent life insurance with a guaranteed death benefit and cash value benefits, whole life insurance may be the best choice for you.

Some individuals who benefit from whole life include those who:

Want to provide a death benefit to their beneficiaries, no matter when they die
Have a lifelong financial dependent, such as special needs kin
Plan to take advantage of the cash value of the policy while they are alive

With so many aspects to consider when choosing your life insurance policy, it’s always best to consult with an insurance agent before deciding on a respective policy. Professionals like Sim Gakhar can help guide you to make the optimal decision around your life insurance coverage.

You don’t want to end up with more or less than you need, so call Sim today to help you make the best decisions for your future.

FAQs & Helpful Resources Regarding Whole Life Insurance

Other Types of Life Insurance Products You May Want To Check Out

When To Get Covered

When it comes to life insurance there really is no time that is too soon to get covered. And, this is because the younger you are, the cheaper those premiums are going to be. Not only this, but you are probably healthy right now.

If you wait until something bad happens, you will not only without a doubt face higher premiums, but you might not even be able to get covered at all.