Home Articles A How-To Guide to Whole Life Insurance

A How-To Guide to Whole Life Insurance

Ensuring the security and financial well-being of one’s family is on the mind of many citizens worldwide. Whole Life Insurance, a form of permanent life insurance, is the perfect option for those who want to leave a secure future, but do not want to spend too much money. Whole Life Insurance first became extremely popular during the 1940s to the 1970s and continues to this day.

What is Whole Life Insurance?

Whole Life Insurance can be defined as a policy that provides lifetime coverage. Along with the policy’s death benefit, a savings component is also included.

Whole Life Insurance differs from Term Insurance in that it is not simply for a term, but for one’s entire life, as long as premiums are paid monthly.

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In addition, it includes fixed level premiums, which are eligible to be paid out after a few years.

Whole Life Insurance is ideal for those planning their estate and want their children and/or spouse to be able to pay for their funeral expenses, offset the taxes payable on an RRSP in Canada, and even leave a financial gift to one’s favorite charity.

Benefits of Whole Life Insurance

Whole Life Insurance offers various benefits, such as whole life protection, cash value growth, additional income, a source of cash, and annual dividends.

In addition, there are various benefits of Whole Life Insurance over Term Life Insurance. Unlike Term Life Insurance, which provides death benefits only, Whole Life Insurance provides death benefits, as well as accumulated cash value built during the policy. In addition, Term Life Insurance only pays if one dies during the term the policy is bought for. It is not paid out if the person lives beyond the policy term. While Whole Life Insurance is often more expensive than Term Life Insurance, it often saves one money in the long run.

Luckily, many Term Life Insurance policies allow policyholders to convert to Whole Life Insurance. This is especially beneficial for those in their 50s and 60s, whose term policy is about to expire, those who are unable to extend their policy, because their current one is no longer available, and those interested in estate planning.

Cost of Whole Life Insurance

The cost of Whole Life insurance depends on a variety of factors, such as health, age, and even gender.

  • Age – In particular, personal risk factors that impact the cost of life insurance include age; the younger the person is, the cheaper than premiums will be. This is because the longer one lives, the longer they will pay their monthly premiums.
  • Gender– In addition, gender matters greatly, with females paying significantly lower premiums than males. This is because women are expected to live longer, an average of 81.3 years, as opposed to 76.3 in men.
  • Smoking – Smokers pay much more expensive rates than non-smokers do. For example, a 30-year old smoker will pay approximately 2 to 3 times as much as a non-smoker. Often, former smokers must have quit for 2 years to be considered non-smokers. Chewing tobacco and vaping are also considered a form of tobacco use.
  • Health Conditions–Life insurance premiums will also be affected by one’s personal health history, including cancer. Family health history is also taken into account as well. These include conditions resulting in the death of family members before the age of 60. Under this umbrella, often travel to a foreign country in the past 6-months is taken into consideration, because of potentially life-threatening diseases that are not common in Canada and the United States.
  • Occupation – Finally, life insurance costs are also affected by one’s occupation. Hazardous jobs, such as pilot, commercial diver, fisherman, truck driver, roofer, and construction worker are some examples of jobs that pay increased premiums.

In the United States, a Whole Life Insurance policy with a $250,000 USD death benefit for a 30-year old male, non-smoker is approximately $250 USD monthly. This increases to $357 USD at 40-years old, $549 USD at 50, and $884 USD at 60-years old.

In contrast, a policy for a 30-year old female, non-smoker, with a similar $250,000 USD payout, pays $218 USD monthly. At age 40, the monthly rate increases to $322 USD, at 50, it rises to $492 USD, while at age 60, the cost is approximately $807 USD.

In Canada, various Whole Life Insurance providers offer free online quotes after filling out easily online questionnaires. For example, a 36-year old female, non-smoker from Ontario in good health will expect to pay approximately $160.88 CAD per month for a $250,000 CAD policy.