| Whole life insurance is a type of policy that | | | | Cash Value = the actual amount that the policy is |
| provides you with insurance protection for the | | | | worth. Cash value will grow over time within a |
| rest of your life, from the time you actually | | | | Whole Life policy, however, it will never reach the |
| purchase the policy, until the day you either pass | | | | Face Value amount of the policy unless the |
| away, you stop making the premium payments | | | | insured individual reaches 100 years of age. At this |
| or you reach the age of one hundred years. At | | | | point the policy has fully "matured". |
| that point, the insurance company will pay the | | | | The way that this works is that a portion of the |
| owner of the policy 100% of the face value, | | | | money paid into a Whole life policy goes toward |
| which will also be the cash value. Therefore this | | | | buying insurance, while the remainder goes into an |
| type of policy insures you for your "whole life". | | | | interest bearing account. This money can be |
| One of the interesting things about Whole life | | | | borrowed against later in life, if you choose to do |
| insurance is that it also builds what is called "cash | | | | so and can be used for practically any purpose, |
| value" over time. This cash value should not be | | | | however, just like any other loan it must be |
| confused with the "face value" of the policy. Let | | | | repaid. |
| me explain the difference between the two. | | | | Whole life insurance isn't as popular as it once was. |
| Face Value = the amount of money that the | | | | These days many people are buying Term life |
| insurance policy is supposed to provide in the | | | | instead because it's less expensive and also |
| event of the insured person. In other words, if | | | | because that way they're buying only "pure" |
| the policy is for $50,000, then the face value is | | | | insurance and can make the decision to invest |
| $50,000. If the person was insured for $100,000, | | | | their money elsewhere. You can always start out |
| then the face value of the policy would be | | | | buying Term and upgrade to a whole life |
| $100,000. Whatever the amount is that the policy | | | | insurance policy later in life, if you choose to. The |
| is supposed to pay is the face value. | | | | decision is yours. |