The provisions of limited whole life insurance, also known as limited payment life insurance, are similar to those of standard whole life policies, but the premiums are guaranteed to stop when the insured person reaches 65 years of age. The policy is permanent and the death benefit remains in force when the premiums cease; however, for the time you are paying premiums, the rates are higher.
Limited payment life insurance offers a fixed premium and will eventually accrue a cash reserve like other whole life policies, and the total cost for both types of policies is the same. The only difference is that, because higher payments are made earlier in the policy, the cash value grows faster and larger.
How Can The Payments Stop At Age 65?
A limited payment life policy usually charges slightly higher whole life insurance rates than standard contracts since the term of payments are shorter. The total cost is the same and affordable, but since there may be fewer premiums paid on the limited payment policy, premiums are not as cheap as term life insurance rates.
These policies are primarily designed for people who have chosen to buy life insurance later in life and want to have guaranteed coverage with no payments when they retire.
For Estate Planning
The advantage of a limited payment life policy for estate planning is that the policy leaves a death benefit for surviving family while providing a nest egg at retirement for the policyholder, in case it is needed. Since limited whole life insurance builds the cash value faster, also known as the investment or savings component, it may be an attractive option for those planning retirement and need to be forced to save.
You can also borrow up to 90% of the cash value while still retaining the death benefit, which can provide a nice cushion for retirees.
Who Should Consider Limited Payment Life Insurance?
Limited payment life insurance is a good investment for those within 10 to 15 years of retirement. Young adult have other investment options which are better-suited to long-term financial planning, including buying a term life insurance policy and investing the difference in premiums in index funds or fully-funding their retirement accounts.
Individuals in their 50s who have failed to sufficiently plan for their retirement will find the limited whole life policy an attractive way to provide a little extra for their retirement years.
Limited Whole Life As Additional Insurance
Some families may have a whole life insurance policy which has been paid in full and is part of their retirement savings. If you plan to cash in the policy to help pay for expenses during your retirement, you may want to consider limited payment whole life insurance for extra protection. Withdrawing the full whole life cash value and letting the policy lapse will leave your dependents without financial security. A limited whole life policy can provide the death benefit your children need with an emergency fund that can be borrowed against if necessary.
Before buying, consumers must evaluate the pros and cons of whole life insurance, including the higher rates versus the guaranteed rate of return on the cash value. Similarly, after you’ve decided which type of coverage best addresses your family’s financial needs, get free life insurance quotes online.
Websites like MyLifeInsuranceQuotes101.com provide consumers life insurance quotes to help them instantly find and compare rates, policies, and coverage options from the best companies. This helps shoppers buy the best and cheapest life insurance available in the market.