What is Straight Life Insurance?
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A policy that provides continuous premiums that remain level for the policy’s life is known as a Straight Life Insurance Policy. Better, known as whole life insurance.
A straight life policy will build cash value over time as you continue to pay your premiums. These policies are more expensive. Therefore, we don’t recommend them for a short-term life insurance situation.
How does straight life insurance work?
Straight life insurance will provide a guaranteed death benefit with fixed premiums. It will last your entire life if the premiums are paid on time. It is better known as ordinary life or just plain old whole life. Straight life insurance is also very different from term life insurance that expires at the end of a set period.
What type of premium does a straight life policy have?
You are referring to the premium structure of a whole life policy the word straight means that the premium will remain level and will not go up or down during the policy’s life. For instance, you could have a $50,000 straight life insurance policy; your paying $25 a month. The $25 a month premium would not change for the entire time you have the policy.
There are also flexible premium option policies that have premiums that may or may not increase or decrease throughout the plan’s entire life. There are so many different plan options and features to go through when selecting a life insurance policy right for you and your loved ones.
It’s always best to talk to an independent broker like Coach B. so he can help with selecting the right fit for you. If you know that your needs will be changing in the future, then a flexible universal life plan might make sense for you.
Cash value account
Straight life insurance comes with a cash account built into it that will grow over time as you make premium payments. This account is separate from the death benefit account. Every month as you make the payments, some monies will be added to this account. The rest of the funds goes into paying the cost for the death benefit.
The cash value is an interest-earning account inside of your straight life insurance policy. The cash account will have a guaranteed interest rate and will grow throughout the life of the policy. The cash value return rate at some point will be equal to the death benefit. At this point, one can use the cash account for many different things like:
- Surrender Value – Decide you no longer want your policy; you can turn it in and get your cashback.
- Loan Collateral – Get a loan from the insurance company using the policy as collateral. Can borrow up to the total cash value of the policy.
Very put, the cash value represents the amount of money invested in your life insurance policy. You can use this balance in various ways, but it will subsequently be deducted from your death benefit if you remove money from the policy.
Pros and cons of straight life insurance
If you are looking for an insurance product that will provide some long-term planning, a straight life policy is made to last a lifetime, so it might be a policy to look into. Straight life policies are not designed for short-term needs as it often takes years to see any income returns from the policy’s cash side.
After all, a straight life insurance policy is much more expensive than a term life insurance plan. For instance, average cost of a 20-year $100,000 term life insurance policy is $225 per year.
When comparing this to a straight whole life insurance policy, which can have premiums over $1,200 per year for a policy with $100,000 in coverage, shows a significant cost difference between the two policies. Therefore, if your shopping for life insurance for periods shorter than 20 to 30 years, we highly recommend a no medical exam term life insurance policy.
Along with term life insurance, a guaranteed universal life policy is another cheap life insurance option to consider and very easy to apply and be approved for. This policy is a form of permanent life insurance coverage with a cash value account that is guaranteed to no go below zero.
Thus, it can be a good solution if you want lifelong coverage without the need for the cash value account or are not particular about whether you need permanent or term life insurance. Additionally, guaranteed universal life can be considerably cheaper when compared to other permanent policies.
About Coach B.
After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.
In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.
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