Life insurance benefits vary across private insurance companies and policy type. Whole life insurance is one of the three main types of life insurance, and it has many great benefits. But is it the right choice for you and your family? This article will give you all the basic knowledge you need to understand what whole life insurance is and how it compares to other life insurance coverage options for military personnel and their families.
Features and Benefits of Whole Life Insurance
As with any life insurance policy, the exact cost, features, and terms of a whole life insurance policy will vary across different providers, but there are some basic features that are common to all whole life insurance plans.
Tax Free Death Benefit
The death benefit is the main reason for having life insurance. It is the sum of money that is paid out to your beneficiaries (typically family members) when you (the insured) pass away.
Typically, this death benefit payout is protected as non-taxable income. It can help your loved ones cover final expenses, settle your debts, cover other financial obligations left behind, and make up for lost income that they might have depended on you for. It can also help them buy time while they grieve, without having to rush back to work immediately.
Whole Life Coverage
Whole life insurance is one of two types of life insurance plans that are classified as “permanent life insurance,” with the other one being universal life insurance.
Permanent life insurance is distinguished from term life insurance by the lifetime coverage it affords. Whereas term life insurance expires after a specific period of time, whole life insurance coverage will never expire, as long as the monthly premium payments are being made. That means your tax-free death benefit will remain in force whether you die early in the life of the policy or 80 years into the policy. This is one of the most advantageous benefits of whole life insurance.
Fixed Monthly Premium
Another major benefit of whole life insurance plans over term life insurance is the fixed monthly premiums. Term life coverage can be renewed when the initial term expires, but with each renewal comes a new monthly premium rate, which increases with age. With whole life insurance, your monthly premium will never increase. The cost of the policy at age 20 and the cost of the policy at age 100 will be exactly the same. For that reason, it is best to start a whole life insurance policy as early in your life as possible.
Tax-Deferred Cash Value
Another benefit of whole life insurance that is maximized when the policy is started early in life is the cash value component of the policy. Unlike term life insurance, a whole life insurance builds cash value over time. This is referred to as a “living benefit” because the cash value of the policy can be partially withdrawn or borrowed against for loans while the insured person is still alive. It can also be used to help pay for the policy’s premiums. The cash value remaining at the time of the insured’s death is distributed to the policy’s beneficiaries along with the death benefit.
This cash value accumulates tax-deferred, meaning that it is only subject to taxation when withdrawn or released when the insured dies.
Rules for when cash begins to accumulate, when it can be withdrawn, how much can be withdrawn, and whether withdrawals come with any penalties vary across the whole life policies of different providers. For that reason, it is always important to speak with a company’s life insurance agent if you’re considering purchasing a whole life insurance policy from that company and are interested in its potential for building tax-deferred cash value.
Is Veterans' Group Life Insurance (VGLI) a Whole Life Policy?
Veterans’ group life insurance (VGLI) is a life insurance policy offered to veterans of the armed forces and national guard through the VA. It is very important to understand that VGLI is a term life insurance policy. That means it does not accumulate any cash value.
Retired service members can retain VGLI coverage throughout their lives as long as premiums are paid. However, like all term insurance, VGLI periodically renews at higher rates. Specifically, the cost of VGLI increases every five years. You can see the specific premium rates by age bracket on the VA’s website.
Is VGLI Worth the Money?
One of the most common things our agents hear from the veterans we serve is “I wish someone had told me about whole life insurance many years ago.” VGLI is a convenient life insurance option for service members when they first leave the military, ensuring that there is no lapse in their coverage when they lose their SGLI coverage after retirement. It offers relatively high amounts of coverage (up to $500,000 in death benefit) at an affordable cost for young people, but the older you get, the more expensive it gets.
By the time you’re in your 50s and 60s, the rates can be prohibitively expensive. Our agents speak to a lot of veterans in these age brackets who are discovering for the first time that their VGLI rates have been escalating in this way.
Unfortunately, by that time, it can also be relatively expensive to start a whole life insurance policy, and it may be difficult for them to be approved for one anyway due to factors in their medical history. This is another reason why it is smart to begin a whole life insurance policy as early in life as possible, to take advantage of lower premiums that will not increase with age.
In short, VGLI can be worth the money as a temporary solution immediately after leaving the military, but for veterans who wish to obtain lifelong insurance that will protect their families and provide long-term financial security, we always encourage shopping around for permanent life insurance coverage options as soon as possible.
Veterans' Life Insurance Through the Military
The military does offer whole life insurance. As stated earlier, SGLI and VGLI, which are offered by the military, are both term life insurance. But the military also offers more specialized types of life insurance policies, including a form of whole life insurance known as Veterans Affairs Life Insurance (VALife).
Veterans Affairs Life Insurance is a new program that recently replaced Service-Disabled Veterans Life Insurance (S-DVI). As the name of the old program implies, VALife provides life insurance coverage for veterans who have some form of service-connected disability, including those who may be totally disabled. For those who qualify, VALife provides guaranteed acceptance, meaning that applicants do not need to show proof of good health to be approved.
VALife is whole life insurance that offers lifelong insurance coverage with a cash value component, just like any other form of whole life insurance. It is not free life insurance, but it is offered at a relatively low cost, making it an excellent option for disabled veterans who want permanent coverage. The only downside is that the amount of coverage offered is also relatively low, maxing out at $40,000 in death benefit. However, everyone’s needs are different. For some veterans, this may be all the coverage they need.
Is Whole Life Insurance Right for You and Your Family?
If you have family members who depend on you for income and financial support, the peace of mind and financial security that come from having permanent insurance can be really great to have.
Additionally, the cash value of whole life policies can help you meet important financial goals while you’re still alive, such as down payments and mortgage payments on a house, college tuition for your kids, and more.
As always, it’s a good idea to speak with a life insurance agent, as they are trained to make recommendations based on your specific life circumstances and goals. You may also wish to speak with a financial advisor about this, as life insurance is an important part of a family’s comprehensive financial planning.
How Much Does a $100,000 Whole Life Insurance Policy Cost Per Month?
There is no easy catch-all answer to the question of how much whole life policies cost, or how much life insurance you need. It depends on a variety of factors, ranging from your age and medical history to the company you are purchasing the policy from, the amount of coverage you wish to purchase, and so on.
For a healthy person in their 20s, a $100,000 life insurance policy could cost less than $100 per month, but for a much older person with more health complications, it could cost several hundred dollars per month. Because of all the factors involved, most life insurance companies will require you to speak with an agent before obtaining a quote that is unique to you.
American Fidelity's Private Life Insurance for Retired Military Families
American Fidelity Life Insurance Company’s agents are available and happy to help walk you through our life insurance policy options, including whole life insurance, and make recommendations based on what you are hoping to accomplish with a life insurance policy.
Whole Life Insurance
We offer a modified whole life insurance policy with an intuitive, customizable cost structure and favorable interest rates that will provide you with lifelong coverage and significant long-term financial benefits from the policy’s cash value. Speak to an agent today to see if this policy is available in your state, if it is right for you and your family, and how much it would cost for you.
Term and Universal Life Insurance with AmFi
American Fidelity also offers term and universal life insurance. You can easily obtain a quote and apply to purchase coverage with term life insurance on our website.
Universal life insurance is very similar to whole life insurance. It, too, offers lifelong permanent coverage at a rate that will not increase as you get older, as well as the opportunity for building tax-deferred cash value.
The main way that universal life insurance differs from whole life is its flexibility. While the cost of universal life insurance will never go up on its own, you can opt to adjust the premium and death benefit amounts over time, as your financial means and needs change throughout life. The specific conditions regarding the accumulation and accessibility of the cash value also differ between our whole life and universal life policies.
If you want to learn more about our whole life insurance policy, and other private life insurance offered by AmFi, we invite you to submit a request to speak with an agent today!
