Which of the following is an advantage of whole life insurance over term life insurance?
1. Guaranteed coverage for life: Whole life insurance provides coverage for the insured's entire life, unlike term life insurance, which only covers a specific period of time. This ensures that the policyholder's beneficiaries will receive a death benefit whenever the insured passes away.
2. Cash value accumulation: Whole life insurance policies have a cash value component, which grows over time and can be accessed by the policyholder through loans or withdrawals. This provides a way to build savings within the policy in addition to the death benefit.
3. Level premiums: Whole life insurance typically has level premiums that do not increase over time, whereas term life insurance premiums typically increase as the insured gets older. This can make whole life insurance more predictable in terms of costs.
4. Dividends: Some whole life insurance policies are eligible to receive dividends from the insurance company's profits. These dividends can be used to increase the policy's cash value, reduce premiums, or provide additional death benefit coverage.
5. Estate planning benefits: Whole life insurance can be used as a tool for estate planning, as it can provide a tax-free death benefit to beneficiaries and help cover estate taxes or other expenses.