Is Whole Life Insurance a Good Investment?
What makes for a good investment? Most people will say the return. And we would tend to agree. However, you also have to consider the value that comes with a product that includes guarantees. Whole life insurance has three primary guarantees.
The first is a guaranteed death benefit. If you die today, in 10 years, or in 50 years, whole life insurance provides a guaranteed lump sum death benefit to your beneficiary. A lot of baby boomers are concerned about how they are going to be buried. As a result, many are buying burial insurance, which is a small policy that covers burial and funeral expenses. But what if they had the foresight to have bought a whole life policy, with an increasing death benefit, at a young age?
The second is a guaranteed level premium. Whole life insurance rates stay the same no matter how long the policy is in force. Further, limited pay life insurance is available, allowing you to make payments for 10 years, 20 years, or to age 65. Once you pay period ends, the policy is paid-up life insurance and you never have to make another premium payment again.
The third is guaranteed cash value growth. A portion of your premium goes into an interest bearing account that compounds over time. The older you get, the more valuable your cash value is. Further, cash value growth help grow your death benefit, increasing your death benefit as you age. That way, when you die, you have the most life insurance possible.
Finally, although not guaranteed, whole life insurance provides dividends. You can use life insurance dividends to pay your premiums, earn interest with the carrier, cash out, or purchase paid up additions. Paid up additions increase your cash value and death benefit.
Accelerated Benefit Riders
Another neglected benefit that makes life insurance worth it is accelerated benefit riders. You can find term life insurance that offers accelerated benefit riders. Most require that you are diagnosed terminally ill with less than 12 months to live. Upon being diagnosed, you can access a portion of your death benefit as a lump sum cash payment to use however you see fit.
Another form of living benefits are chronic illness riders. A chronic illness rider allows you to access a portion of your death benefit if you are diagnosed as being unable to perform 2 of 6 activities of daily living. Some companies also allow benefits to be paid for severe cognitive impairments, such as Alzheimer’s Disease.
Critical illness insurance is another option. If you are diagnosed with a qualifying critical illness, such as heart disease or malignant cancer, you can access your death benefit early to get money you may need to cover hospital bills, home modifications, in home care, etc.
Finally, you can also get long-term care life insurance which provides the benefit of long-term care insurance and life insurance combined. Unlike chronic illness riders, with long term care insurance riders you can get monthly payments for up to 8 years, with some companies offering lifetime long term care benefits. Long term care costs are high, so having money coming in provides a huge benefit that makes life insurance with LTC definitely worth it.