7 Best Benefits Whole Life Insurance
There are 7 Best Benefits Whole Life Insurance:
- Whole life insurance provides a benefit in the event of death, and it also has the potential for tax-deferred cash value accumulation. Premium payments first pay the cost of pure insurance coverage, including the expenses and mortality factors of the insurance company. The company then invests the remaining premium dollars to build the cash value of the policy.
- A second feature of whole life insurance is the predictability of expense. As long as the insured continues to pay premiums according to the contract, premium amounts will not change and will continue until the policy matures, which is when the cash value of the policy equals the face amount of the policy. The point at which premium payments cease is clearly stated in the policy (typically age 65, 75, 85, or 95). The length of the payment period will, of course, affect the dollar amount of the premium payments.
- The guarantee of insurability is a third benefit of whole life insurance policies. Once the policy is issued and as long as premium payment responsibilities are met, the insured is guaranteed coverage for life in accordance with the terms of the policy. Evidence of insurability will not be necessary again, as long as the original policy remains in force.
- The fourth benefit to consider is the ability to borrow against the cash value of a whole life insurance policy. Funds may be borrowed against the cash value of the policy at any time, depending on the policy. It is important to note that access to cash values through borrowing or partial surrenders can reduce the policy’s cash value and death benefit, can increase the chance that the policy will lapse, and may result in a tax liability if the policy is terminated before the death of the insured. Loan approval must come from the insurer, but it is generally fairly routine. No repayment schedule is set beyond the regular payment of interest on the loan, with outstanding loan balances deducted from the death benefit in the event of the insured individual’s death.
- The fifth benefit is whole life, like other forms of insurance, can be used for income replacement, estate liquidity, business succession planning, and a variety of other needs. The primary advantage of whole life is that the premium and death benefit amounts are fixed and certain. You also have guaranteed floors on interest rate crediting and ceilings on expenses charged by the insurer.
- The sixth benefit is that also many people also appreciate that whole life policies have no tie to the stock market, eliminating market and volatility risk. Cash value accumulates only based on the increased tabular value of the policy and any dividends and interest that may be credited to the policy.
- The seventh benefit is Whole life policies that aren’t properly designed will have very little cash value in the early years. But a properly structured life insurance policy will have high cash value percentages, even in its first year, and they increase every year. This becomes an important fact when you realize that access to your cash will help you grow wealth systematically regardless of market conditions.
How to Understand Whole Life Insurance
Like all permanent life insurance policies, whole life provides lifelong coverage and includes an investment component known as the policy’s cash value.
The cash value grows slowly, tax-deferred, meaning that you won’t pay taxes on its gains while they’re accumulating. You can borrow money against the account or surrender the policy for the cash.
But if you don’t repay policy loans with interest, you will reduce your death benefit, and if you surrender the policy, you’ll no longer have coverage.
The premium remains the same for as long as you live, the death benefit is guaranteed, and the cash value account grows at a guaranteed rate.
Some whole life policies are also eligible to earn annual dividends, a portion of the insurer’s financial surplus.
You can take the dividends in cash, leave them on deposit to earn interest or use them to decrease your premium, repay policy loans or buy additional coverage. Dividends are not guaranteed, and only mutual insurers, which are owned by policyholders rather than outside shareholders, pay them.
Get a Free Whole Life Insurance Quote
Whether whole life insurance is the best choice for you will depend on a variety of factors, including your unique goals, needs, and circumstances. Understanding how a whole life insurance policy works will enable you to make an intelligent, informed choice.
We have the independent knowledge to assist you in the right decision. Unlike other agencies, we aren’t beholden to any insurance carrier, but we are beholden to you and making sure our recommendations fit your needs and situation.
Contact us for a free quote at 813-964-7100 or 716-565-1300
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