Whole life insurance question?????

Question

I planning on getting a 50K whole life policy (along with some term). I understand that my whole life policy gains cash value and eventually will be worth well over the 50K the policy promises...... if I die, will my policy pay out the 50K PLUS the cash value it is worth that exceeds the 50K at the time of my Death????

Answer 1

Although it will gain cash value, whole life policies are designed so that the CSV will be EQUAL to the face amount upon age 100.  Not greater than.

Only way to get BOTH is to have a Universal Life (And some Variable Universal Life policies now) policy and PAY for the privilege of getting it (Option B).  Think about it, you have to pay to put money into savings and then pay again to be able to have your family get it when you die.

Save your money and get a bigger term policy.  Your family will be better off.

Answer 2

Yes, it will pay out the cash value greater than 50K.

However, you may want to revisit why you are getting a whole life policy. These policies are generally expensive for what you get, and are recommended in relatively few cases. If you want a permanent policy you should look into either a universal life or a variable universal life policy. The premium for these plans is lower. Where the whole life has a certain interest rate the others' interest rate will change during the policy. This has the advantage of a greater growth potential over time. Ask your agent for a quote for these types before making a decision.

However, never look to a life policy as an investment. There are better investment vehicles available.

Answer 3

Your cash value will never be greater than the face amount of your policy ($50,000 coverage). Your cash value will always be worth less than the face amount of the policy until you hit the age of around 100 (give or take 5 years). If you get to live that long, your policy will expire and the company will pay you the $50,000.

If you die, the insurance company will pay your beneficiary $50,000 coverage, but they will keep all the cash value to themselves. Why? It says so in the policy. If you don't believe me, ask someone who has whole life insurance to read their policy.

To add more insult to the money you are paying, if you ever wanted to withdraw money from the cash value, the insurance company will lend the money to you and charge you loan interest of 6-8%. Thats like you going to the bank, taking money out from your savings and have to put it all back to avoid paying monthly interest on it.

Answer 4

There are two types of death benefit options.  

Option 1:  The company will pay out the death benefit if you die.  You would get $50K no matter when you die.  If your cash value goes above $50K then your death benefit will increase as well.  Life insurance policies are required to have death benefits larger than the cash value otherwise they cease to be life insurance.    

Option 2:  The company will pay out the death benefit plus the cash value.  You would get $50K plus your cash value.  This option would be priced accordingly and your premiums would be a little higher.  

You'll have to figure out which this policy offers by reading the policy.  Most policies are option 1 unless you specifically select option 2.

Answer 5

"...my whole life policy gains cash value and eventually will be worth well over the 50K the policy promises."

Who told you that?  It sounds like you may have been improperly promised dividends.  No one can promise you dividends - not the company, not the agent.  Past performance is not indicative of future returns.

I think you mean, 'my whole life policy might gain cash value and may be worth over 50k, even though the policy only promises 50k as the base amount.'

Oh, it pays the death benefit, what ever that is.  Read your illustration carefully again and take head of the disclosures at the bottom.

Answer 6

Yes, and you can use the actual cash value as equity or collateral. You can borrow against that cash as well if you need it. These policies usually have the benefit of the terminal illness benefit too. If you find yourself with a terminal illness, you can actually withdraw in advance up to one half of the face value of the policy to get additional treatments, or for whatever reason you want, and have the  remaining half of the face value for a death benefit.

Answer 7

"I understand that my whole life policy gains cash value"

Don't count on it .. when these policies are linked to house purchase they are known as 'Endowment' policies ...

Answer 8

You would have to live to 100 (thereabouts) for the cash value to be worth the face value of the policy.  Sure there are different ways to fund them, but generally you're looking at about a 2-3% return on your money.  If you need insurance for a long period of time then you should get a lower cost universal life policy with guaranteed premiums to age 100.  

In addtion to that you should compare a $50,000 policy to a $100,000 policy.  There are break points in insurance much like when you're buying beverages.  It's cheaper per unit when you buy the whole case -- and $100,000 is case size.  Anything under that isn't going to be overly competitive.

Use the tool on my site and quote "to age 100 guaranteed" policies and plug in $50k and $100k to see the difference.  You can quote term insurance as well.  It asks no private information other than a date of birth to use it and it provides rates from ~150 carriers.

http://insurancepickle.com/life-insuranc...

And, to answer your question in the early years the death benefit would remain at the face value, but as the cash value grows it'll escalate the death benefit.  The policy will always maintain a minimum gap between the cash value and the death benefit.  So, even when the policy would have $40,000 in cash the death benefit may have grown to be $60,000.