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interest rate (i.e. four or five percent). The longer the policy owner pays the premiums and keeps the coverage, the more time the cash value has to appreciate, which results in a larger cash value over time.

But what if you decide that you don’t need the insurance cover- age? Does that mean that you no longer have access to your cash value? No. If you decide that you want to cancel your whole life pol- icy, you are forfeiting the right to a death benefit when you die. How- ever, because of that forfeiture, the insurance company is obliged to give you the cash value from your policy. Insurance companies put aside assets in anticipation of paying off life insurance claims. As time passes, the amount of money set aside for each insured (the cash value of each policy) increases to reflect the increase in paying off claims. After all, the chance of death increases with the age of the policyholder. As long as the policy is canceled prior to the death of the insured, the insurance company must return the cash value. Since the insurance company is holding and accumulating that money to pay off the insured’s future death claim, the company no longer requires that money once the policy is canceled.

There are a wide variety of types of whole life policies, but we only touch on three main types: continuous-premium, single-premium, and limited-payment.

Continuous-Premium Whole Life This type of policy is the most common because the policyholder pays premiums throughout either the lifetime of the policy or his or her own lifetime. Continuous-premium whole life is also referred to as a “straight life” policy since you pay straight through your life. The premiums remain level as long as the policy is in force. There- fore, the younger you are when you purchase a straight life policy, the lower your premiums will be. However, the younger you are when you purchase a policy, the more you will usually wind up pay- ing as a whole since you will be paying for coverage for a longer period of time. But your annual premium will be less than it would be if you were to wait until you were older to purchase a policy.

A person should buy life insurance because there is some type of need, not just because the premium would be lower if the policy was purchased at age 25, rather than at age 40. Generally, for younger

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