The following post is written by Brian So from Brian So Insurance
If you have ever spoken to a life insurance broker or researched life insurance online, you may have come across a type of insurance called whole life insurance. What is whole life insurance and how does it compare to term insurance? More importantly, is whole life insurance worth it?
What is whole life insurance?
Whole life insurance is a type of permanent life insurance. Its premium is guaranteed and level for the life of the insured until age 100, when the policy is paid up and no further premium is necessary.
Because the premium never increases over the life of the policy, it starts out much higher than the premium for term insurance. The premium in the earlier years is more than necessary to cover the cost of insurance. The excess is kept inside the policy as a cash reserve. As the insured ages and his mortality rate increases, the premium he pays is no longer sufficient to keep up with the mortality rate. The excess premium paid in the early stages helps supplement the policy in the latter stages.