It ought to be simple getting a whole life insurance definition. But it’s not. This is because it can be a complicated product & also because some of the terms used in relation to it are misleading. For example it is widely introduced as having an ‘investment’ element when it fact it doesn’t. This ‘investment’ element is in fact a savings element which is seldom referred to exactly because of confusion in understanding about what is an investment asset & what is a savings asset.
What you get with a whole life insurance policyowner
A whole life policyowner not only provides a death benefit, which is common to all life policies but something more. These policies have a money value part which also goes to your heirs at the time of your death. The premiums of whole life policies are set above what is necessary to cover the worth of the death benefit alone & the difference is spoken of as being ‘invested’ on your behalf by your insurer. This so called ‘investment’ is not however speculative as normal investments are. It is common for the return you will get to be exactly defined in the policyowner.
The definition of a whole life policyowner has to include this money value part of the policyowner as well as the death benefit part. It also ought to include it’s character as a savings asset. What this means is that money put in to the policyowner is ‘saved’ in comparable way to money put in to a bank account.
Whole life insurance is a savings asset not an investment
The sales asset character of a whole life policyowner is not exactly like putting money aside for when your heirs need it. Definitely that is true but it leaves out the leveraging effect of this type of savings asset. All life insurance is tax exempt, including whole life policies. This means that money put in to one of these policies is worth more to your overall estate than it’s face value.
When you die, your heirs receive a death benefit. They also get the worth of the premiums you have paid for this policyowner minus administrative costs. This money value part however has a higher value for your heirs than money put aside as savings. They receive this money without having to pay any tax on it. For this reason people practicing cautious estate planning usually include a whole life policyowner within their portfolio because it lets them pass on part of their estate without their heirs having to pay tax on whatever amount is involved..
How are whole life policies different to term life polices?
With term life insurance you pay set premiums as you do with a whole life policyowner but you are covered only for a specified term, say 10 years, not your whole life. In addition the premiums you pay for term life policies do not accrue as a money value to you. In the event you die, you heirs receive a death benefit but not the worth of the premiums you have paid. To reflect this difference the premiums paid for term life policies are lower than they are for whole life policies.
The difference between term life & whole life policies is not cheaper premiums but that term life pays a death benefit only. To be fully correct the whole life insurance definition must include it’s character as a savings asset which can be used in estate planning as well as also being a life policyowner. Both forms of life policies provide death benefits which are tax exempt but in the event you need to leverage the tax exempt status of a life policyowner then you need to buy a whole life policyowner & along with your financial advisers work out how to make use of the money value part of the policyowner to benefit your heirs financially.
In the event you are purchasing a life policyowner to provide a death benefit to your heirs or as a type of burial insurance or as a way of covering financial obligations at the time of your death then you can appropriately buy term life insurance. Of work a whole life policyowner will also deliver the above benefits but in the event you are purchasing life insurance as part of a complex set of investment & estate protection then only a whole life policyowner will do. Whole life insurance definition must include it’s complex nature & its capacity to fulfill this latter purpose. As with all forms of insurance receive a quote from a reputable insurance company to help you make up your mind which life policyowner is best for you.
By: Rashid
What you get with a whole life insurance policyowner
A whole life policyowner not only provides a death benefit, which is common to all life policies but something more. These policies have a money value part which also goes to your heirs at the time of your death. The premiums of whole life policies are set above what is necessary to cover the worth of the death benefit alone & the difference is spoken of as being ‘invested’ on your behalf by your insurer. This so called ‘investment’ is not however speculative as normal investments are. It is common for the return you will get to be exactly defined in the policyowner.
The definition of a whole life policyowner has to include this money value part of the policyowner as well as the death benefit part. It also ought to include it’s character as a savings asset. What this means is that money put in to the policyowner is ‘saved’ in comparable way to money put in to a bank account.
Whole life insurance is a savings asset not an investment
The sales asset character of a whole life policyowner is not exactly like putting money aside for when your heirs need it. Definitely that is true but it leaves out the leveraging effect of this type of savings asset. All life insurance is tax exempt, including whole life policies. This means that money put in to one of these policies is worth more to your overall estate than it’s face value.
When you die, your heirs receive a death benefit. They also get the worth of the premiums you have paid for this policyowner minus administrative costs. This money value part however has a higher value for your heirs than money put aside as savings. They receive this money without having to pay any tax on it. For this reason people practicing cautious estate planning usually include a whole life policyowner within their portfolio because it lets them pass on part of their estate without their heirs having to pay tax on whatever amount is involved..
How are whole life policies different to term life polices?
With term life insurance you pay set premiums as you do with a whole life policyowner but you are covered only for a specified term, say 10 years, not your whole life. In addition the premiums you pay for term life policies do not accrue as a money value to you. In the event you die, you heirs receive a death benefit but not the worth of the premiums you have paid. To reflect this difference the premiums paid for term life policies are lower than they are for whole life policies.
The difference between term life & whole life policies is not cheaper premiums but that term life pays a death benefit only. To be fully correct the whole life insurance definition must include it’s character as a savings asset which can be used in estate planning as well as also being a life policyowner. Both forms of life policies provide death benefits which are tax exempt but in the event you need to leverage the tax exempt status of a life policyowner then you need to buy a whole life policyowner & along with your financial advisers work out how to make use of the money value part of the policyowner to benefit your heirs financially.
In the event you are purchasing a life policyowner to provide a death benefit to your heirs or as a type of burial insurance or as a way of covering financial obligations at the time of your death then you can appropriately buy term life insurance. Of work a whole life policyowner will also deliver the above benefits but in the event you are purchasing life insurance as part of a complex set of investment & estate protection then only a whole life policyowner will do. Whole life insurance definition must include it’s complex nature & its capacity to fulfill this latter purpose. As with all forms of insurance receive a quote from a reputable insurance company to help you make up your mind which life policyowner is best for you.
By: Rashid
No comments:
Post a Comment