While a lot of companies offer whole life insurance, the value of the coverage you receive depends on a number of factors. This article will help you understand whole life insurance better, how to know if you qualify for 5 million in coverage, and companies that offer 5 million coverage for whole life insurance.
What Is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance that provides permanent protection to the policyholder. Such a policy offers two things; a death benefit and a cash value.
The cash value is the savings component of the policy which grows over the life of the insurance. The insurance company sets aside some of the premiums paid and invests in them. Also, this amount grows in a tax-deferred basis only if the policy is in force.
The death benefit is usually paid to the beneficiary(s) listed on the policy after the policyholder dies. The beneficiary has the right to use the money however they want to since the policy has no restrictions on what the benefits should be used for. So, the policyholder sets up the policy to pay off mortgage loans or final expenses or for another use, it is important to choose a trustworthy beneficiary.
Who It’s For
Generally, most people take out whole life insurance for different reasons including leaving financial support for their loved ones after they die, paying off a loan, and for their final expenses, among others. However, whole life insurance can be beneficial from another perspective.
It is a great choice for someone who wants more than just pure coverage. Remember, whole life insurance accumulates a cash value. The cash value amount accumulated after a certain period can be withdrawn. It is like stashing cash away for future use since the accumulated cash value is money taken from the premium payments made.
This is why whole life insurance is more expensive than term life. The policyholder is paying more for the insurance, part of which goes to the savings portion, which is the cash value, while the rest goes to the insurance policy.
So, an individual looking for a savings component is better placed locking a whole life insurance policy. For instance, after paying for the policy for about 10 years, you can withdraw the cash value accumulated so far for your own use.
Pros and Cons
Whole life insurance has both the good and the ugly side. It is good to some extent but has a few cons which make it unfavorable to some people.
Below is a quick rundown of some of the top benefits offered by whole life insurance;
Whole life insurance provides you coverage as long as you live. This means that the benefit will only be paid to your beneficiary(s) after you pass away.
Constant Premium Payments
One question that is unclear to most people is if the premiums change, they don’t. When compared to term insurance, whole life insurance policies are usually higher in premium, but constant. This makes whole life insurance affordable especially when the policyholder has a stable source of income to make the premium payments and keep the policy in force.
Guaranteed Death Benefit
The death benefit for whole life insurance policies is usually guaranteed. The death benefit amount is tax-free and is only paid out to the beneficiary if the policy remains active. So, if the policyholder stops paying premiums at some point, then a death benefit will not be paid to the beneficiaries after they die.
Cash Value Accumulation
When the policy premiums are paid, part of that money is used for cash value build-up. This amount set aside and accumulates throughout the life of the policy, as long as the premiums are paid. The cash value amount is usually tax-deferred, so it is easier for the policyholder to predict the total amount.
If need be, the policyholder can also borrow against the cash value if any has been built up.
But there is a catch: the amount will be taken out from the cash value of the policy or may be deducted from the death benefit at the time of issue. The interest will be compounded and in the long run, when added to the initial loan amount it may exceed the cash value amount. So, borrowing against the cash value should only be done if you will plan to pay back the loan.
Another perk of whole life insurance is that it can be customized with different riders of the policyholder’s choice. A rider is an add-on portion to the insurance contract with additional charges. It helps the policyholder to customize their policy and tailor it to their needs or changes they may have. While not all companies offer rider, most of those which offer them have specialized riders, so it is important to make an inquiry beforehand. Some examples of rider offered include disability income rider, long term care rider(LTC), level term rider, and accidental death benefit rider.
While whole life insurance is a great life insurance choice, it may not be the best thing for you. So make sure you know both the rewards and consequences it has. That said, below are a few limitations of whole life insurance.
Whole life insurance premium rates are expensive when compared to term life insurance policy premiums. This is because whole life insurance builds a cash value from the paid premiums throughout the life of the policy.
Cash Value Accumulation is Not immediate
The cash value of whole life insurance does not begin to build up immediately after the policy is locked. In most cases, the cash value will start to build up after two or three years, as long as no premium payments are skipped.
This also affects access to loans, since you can only borrow against the cash value. So, as the cash value accumulation, loans will be inaccessible until you reach a certain set minimum.
Who Needs 5 Million in Coverage?
Based on the payable premiums, the coverage amount for each policy will be different. Before deciding how much coverage you will need, there are a few things to consider. Not everyone will need 5 million in coverage for a whole life insurance policy. Again, not everyone who needs 5 million coverage for whole life insurance should lock in such a policy. There are a lot of things you need to gauge before choosing a policy that offers 5 million in coverage. You need to establish your financial needs, both current, and future, to determine if the coverage will be right for you.
How to Calculate Needs Analysis
When choosing your whole life insurance coverage, you need to do a needs analysis. This includes your personal needs and those of your beneficiaries. Below are ways of calculating your whole life needs analysis.
Outside of the recommendations below, consider your personal situation and makes sure you include any unforeseen expenses into the calculation.
Health and Age
Life insurance premium rates will increase with age. The older you are, the more premiums you will pay. Since your coverage will be determined by the premiums you are paying, you don’t want to pay expensive premiums for coverage that does not align with your needs. Also, if you are older, chances are that you have fewer dependents to support.
Your life stage should influence the amount of coverage you need. For instance, a 27-year-old single with a steady income source will have lesser needs compared to a 27-year-old married with two toddlers. Also, someone who is near retirement will need less coverage than a 45-year old.
If your health is poor, the riskier it will be to insure you. A younger person with good health will pay lesser premium rates than an older person with poor rates, and for potentially high coverage.
Your income is an important factor when it comes to life insurance policies. Given your monthly income amount, will you be able to comfortably pay the policy premiums without sacrificing other important needs? As such, you need to consider the premiums payable for 5 million coverage. The coverage amount may be what you need, but will you be able to afford to pay the monthly premiums? If not, then taking out a 5 million life insurance may not be a good choice for you. It will only be applicable if you are able to afford the premium payments.
Outside of personal considerations, there are financial obligations to consider.
How many dependents do you have? If you have kids depending on you, how old are they? Do you want to leave a legacy for your dependants? If you have many dependents, then the 5 million insurance may not be enough, but with one kid, for instance, the coverage amount may be enough.
Also, you may have more than one kid, but who may be grown up and soon-to-be independent. The 5 million coverage, in this case, may be more than enough. If the kid is a toddler, factor in the cost of raising him/her to be independent. The coverage may not be enough considering the cost of basic needs and their education fees.
Again, you may have a kid who is in college. In this case, the 5 million coverage would be applicable if the death benefit is meant to cover their needs before they can be independent.
Simply put, the number of your dependants and their needs altogether will go into determining if the 5 million life insurance coverage will be enough or not.
If you have a debt, the last thing you want is to leave the burden of repaying it to your loved ones. Your life insurance coverage amount should be enough to pay off the remaining loan amount. If your dependents will continue using an asset that you set as collateral, then you may want to leave enough death benefit for them.
After your death, how will your family pull through? Are they all independent or will they be left suffering? If they are fully dependent on your income, then you will need the coverage.
After your death, you want to ensure that all your assets will be managed how you want them. For instance, if you have a business that you want to sell off after your death, you will need the coverage to keep it afloat before the next owner takes over.
Whole Life Insurance Alternative for Permanent Coverage – Guaranteed Universal Life Insurance
If you are still having a hard time deciding whether or not to secure a whole life universal policy, then Guaranteed Universal Life insurance is your best alternative. It is also known as GUL and is a combination of both whole life and term life insurance. It allows the policyholder to choose the age they want the coverage for, as opposed to term life which allows you to choose a term.
For example, you may choose ages 90, 95 and so on, up to 121 years.
Just like whole life insurance, GUL stays in force as long as the premium payments are made. This is called the “no-lapse” guarantee. Also, GUL does not accumulate a cash value, meaning that it lacks a savings component, which makes it more affordable.
The main advantage it has over whole life insurance is that it is cheaper. The fact that it has no cash value accumulation, hence no savings component makes it a cheaper but still reliable option. So, it can only be taken for pure protection as opposed to both protection and savings components like whole life insurance.
In most cases, whole life insurance is also mistaken for permanent life insurance. The fact is that whole life insurance is a type of permanent insurance among many others. The reason why it is referred to as permanent life insurance is that it is the most common in that category, and is offered by many insurance companies.
Who It’s For
Oftentimes, GUL is suitable for most people. Health and lifestyle do not limit one’s eligibility for a GUL policy. This does not mean that guaranteed universal life insurance is right for you, there are a few scenarios where it may or may not be.
GUL is for you if;
- You are operating on a tight budget. GUL is cheaper than whole life insurance, so if you are not willing to pay fancy premiums, it is your best bet.
- You don’t want to save money through your life insurance policy. Unlike whole life insurance, guaranteed universal life insurance does not accrue money. As stated earlier, GUL purely acts as a protection component, so it has no savings component in the policy.
- You can pay your premium payments on time. Most GUL policies have strict guidelines that require the policyholder to make all payments on time. Anyone who is not able to make these payments on time risks losing their guaranteed premium, so only choose GUL if you have a stable income flow that enables you to pay on time.
Benefits of GUL
GUL has some benefits which make it unique from other life insurance types. Read on below to see these benefits.
Guaranteed Death Benefit
With GUL the death benefit is guaranteed to the policyholder as long as all the premiums are paid on time. There is no doubt that your beneficiaries, if any, will get the guaranteed amount after your death. With such a policy it is easy to choose a coverage amount especially if you have financial obligations that may need to be managed in the future.
Just like whole life insurance, premium payments made for GUL stay the same until the end. You will have no surprises in the future, and you will always know what you need to pay for the premiums every other month.
No Market Risk
If there are fluctuations in the market and interest rates go high, your premiums will not be affected. This is because GUL does not rely on the performance of any underlying investment.
GUL is cheaper when compared to most life insurance policies. Even better, the policyholder gets to enjoy both worlds of term and whole life. It has the simplicity of term and the permanent coverage of a whole life policy.
Easy to Comprehend and Compare
Another advantage of GUL is that it is easy to comprehend and compare to other insurance products. This is because guaranteed universal life insurance does not have many components attached to it. It is also designed in a simple way for everyone to understand.
Companies That Offer 5 Million Whole Life or GUL
When you realize that you need 5 million insurance coverage, you need to find an insurer. Finding the right insurance company is not always easy, with the market filled with hundreds, if not thousands of them. Below are some companies that offer 5 million coverage for either whole life insurance or GUL.
Prudential UL Protector
This company is financially well-backed and the underwriting process is lenient especially for health conditions that are very risky. Prudential offers policy riders including Benefit Access Rider, Accidental Death Benefit, Enhanced Disability Benefit, Child Level Term Rider, and Living Needs Benefit.
Banner Life Insurance Company
Banner Life Insurance company is among the few with strong financial performance history. The company’s underwriting process is slightly lenient, and the application can be done both electronically or via paperwork. It only offers an accelerated death benefit rider for terminal illnesses.
Applicants in good health qualify for the accelerated underwriting process, but skipping the medical exam will only qualify 1 million in coverage for an individual while taking one may qualify for 5 million or more. In some cases, Principal offers low premiums to the policyholder. The company also offers some policy riders which include Children Term Insurance Rider, Accelerated Benefit Rider(Terminal only), Cost of Living Increase Rider, Waiver of Monthly Policy Charge Rider, Salary Increase Rider, and Extended Coverage Rider. It is good to note that some of these policy riders have exceptions, so crosscheck with the insurer first.
Protective Advantage Choice
To qualify for a Protective Advantage Choice policy, you will have to take a medical examination. Protective also offers affordable premiums for the value received and the underwriting process fast. Also, the company offers a lot of flexibility, especially to the GUL package.
Lincoln’s underwriting process is lenient for many high-risk health conditions. Some of the policy riders it offers include Accelerated Benefit Rider with Critical Illness Coverage, Children’s Term Rider, Disability Waiver of Specified Premium, and Accidental Death Benefit Rider, among others.
The above companies are some of the best, but a list for those which offer 5 million coverage for GUL or whole life insurance is long.
Working With An Independent Agent
When choosing a life insurance policy it is best to work with an independent agent than work alone. An independent agent will offer far more than you will be able to accomplish alone, not only with choosing a package but also with selecting the right company. Some of the advantages of working with an agent include;
- Offers expertise
- Saves time
- Offers unbiased advice
- An agent can get you discounts you can’t get directly through insurers
- More company and package choices
- They will assist push your claims through
An independent agent will simply walk with you through the whole process making the process painless for you.
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