Posted : 01/01/2011
Whole life insurance - also called permanent or cash value life insurance - differs from term life insurance because the coverage lasts as long as you pay the premiums. Because of this, however, the insurance company assumes more risk and consequently charges you higher premiums.
Whole life insurance premiums offset the higher cost associated with the increasing likelihood of mortality in the policy's later years by "overcharging" for insurance in the earlier years. The amount you "overpay" in premiums goes into a cash value portion of the account that is legally required to become available to you after a certain period of time. You can often take out a loan against this cash value, or use it to pay premiums if money is tight. The loan is not subject to credit checks, but must be repaid with interest - and reduces the death benefit payment until paid back.
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