Firstly, what is whole life insurance?
It is a contract that is taken out for the entire lifespan of an insured person – usually up to 95 years of age. The guaranteed monthly premiums are fixed for your whole life so long as the policy holder (person paying the monthly premiums) pays them monthly. The policy has a “Face Value” and you pay into the policy until such a time that the “Cash Value” (the actual amount saved) matches the Face Value. If the insured dies, the beneficiary receives at least the Face Value, no matter what age the insured is or what the Cash Value is.
A whole life policy generates a cash value, which can be used whilst you are alive, through withdrawal options. Whole life insurance is therefore life insurance which is part insurance and part investment.
Is a Tax friendly vehicle allowing additional top ups to be made to the policy – increasing it’s cash value.
Offers a guaranteed death benefit (or payout) – which remains the same for life.
The insurance cover pays out upon your death and is very much associated with funeral insurance, and pays out in the event that you become physically or mentally impaired. The investment type of whole life insurance accumulates cash, which you can take out or borrow against. Furthermore, whole life insurance does not expire after a certain number of years like term life insurance, but continues to cover you until you die.
Some of LifeCompare’s insurance partners offer whole life insurance, while others have a separate investment options which you can top up you basic life insurance policy with. A life insurance product like Momentum Myriad is a great example of whole life insurance. Find yours by filling in the form below.
A growing number of South Africans are viewing their life insurance policies as more than just that, and considering them as a type of investment, thus arises the question, “Is whole life insurance a good investment or not?” There needs to be some clarity on a couple of money-related issues which will be discussed below.
What is an investment
An investment is any product or even service which you put money in, betting that money will grow in the future. An investment has risk, and it is that risk that encourages your money to either grow or diminish in value at a later stage.
Whole life insurance is an innovation in the insurance industry, and a much needed one for us South Africans. Think about it, only 20% of us have a life policy out of a total population of 50 million people. And South Africa is a spending nation, with little regard to save for now nor the future. Whole life insurance tackles both of these problems by encouraging the uptake of life insurance, while creating a savings and investing culture among South Africans.
Finally, to answer the question of whether or not whole life insurance is a good investment, we at LifeCompare say, “yes, it is!” With these products, you get the full benefits of both insurance and investment. The combination of the two drives down your own costs because they are a united product, offered by the same company, which allows it to drive down costs that are passed onto you. What’s great is that you can also borrow against your policy, even though the cash is not in your bank account yet.