Whole life insurance is a cornerstone of many peoples financial planning portfolio. Whole life, or "cash-value" life insurance, is an insurance policy which is purchased with the idea that a will be maintained for the duration of the insured's life. It has a level payment and accumulates a cash value over time. Whole life insurance policies are often purchased for children, the long life expectancy creates a low annual premium because the insurance company expects to amortize its risk and expenses over many years.

This is a good choice if you are planning for a certain event, death, and want to cover expenses and provide some help for the beneficiary. Also, whole life may be a good choice if you want to create a savings account, the cash value portion, which you can borrow from in the future, perhaps planning ahead when a child enters college or purchases their first house. As a savings account whole insurance offers the advantage that the savings portion grows tax-deferred allowing it to accumulate at a faster rate than a nontax-deferred account.

Whole life insurance can not be cancelled because of future health problem and the face amount is guaranteed at death less any amounts borrowed from the savings side. As you get old and your life expectancy decreases whole life insurance gets increasingly more expensive. As you get older whole life can get so expensive it no longer makes economic sense to purchase.

A small whole life policy may not provide all the coverage you actually need over your life span. You family and financial responsibilities usually start out small in life, increase through middle age and the decrease as time goes by. As you responsibilities change so must your insurance needs change. Since whole life generally has a set face value there are policies that allow you to buy more or increase the amount at certain specified times in your life, without a physical exam, at the then current rate. These can be good when buying insurance for a child who does not need much but it can be increased at perhaps 20 years of age and again at 30. This type of policies is a hedge against a health problem occurring during that time span making it harder to get increased life insurance.

Whole life's savings side, or investment account, will fluctuate just like similar investments, but the big advantage is that it grows tax-deferred. If you decide to terminate your whole life policy your cash value will be paid out to you, at which time you will be responsible for the taxes.

Before buying whole life insurance you need to think carefully about what dollar amount of coverage you need and how much you are willing to pay. Because this insurance policy is designed to last your whole life you do not want to over commit yourself where you might not be able to pay the premium at some point in the future. Although as the cash value grows you may be able to us the dividends to help reduce the premium payment.

When purchasing a whole life insurance policy find one that:

• has a guaranteed cash value starting at the very first year

• a high cash value the first year

• does not levy "surrender charges" when you cancel

• lets you use the accumulated cash value of the life insurance policy to pay the premiums if, you should ever not be able to make a premium payment, thus keeping your coverage current.