By definition, whole life insurance provides coverage that lasts your lifetime provided that your premiums remain current. Oftentimes referred to as guaranteed whole life insurance, this policy promises that your premiums will remain fixed throughout the life of the policy.
Additionally, whole life insurance provides tax benefits and a cash value feature that grows over time. This policy is perfect for those consumers seeking the benefits of life insurance coverage, as well as a cash value feature that acts as an investment vehicle. Here, we’ll discuss how does whole life insurance work.
Top Five Whole Life Insurance Benefits
Rather than discuss the complexities associated with whole life insurance policies, let’s get straight to discussing their benefits. Actually, the benefits are what make whole life so popular in the first place.
Whole Life Insurance versus Term Insurance
Most shoppers for life insurance struggle with the choice of buying term life insurance versus whole life insurance. It’s a huge choice in the decision-making process.
Deciding which policy to buy should be based on the reasons that you need life insurance in the first place. If you’re concerned with financial struggles during a certain time period, term life insurance can help with that. For instance, term life insurance is the better option if you’re looking to cover mortgage payments or college tuition for a child. There’s simply no reason to purchase insurance that you won’t use later down the road.
Nevertheless, if it appears that your need for life insurance extends indefinitely, you may want to take a look at the lifetime coverage provided by more permanent forms of life insurance.
You may want to contemplate whole life insurance if you:
- Wish to leave an inheritance to your beneficiaries
- Want to fund a trust for your children
- Need funds left for your family to cover final expenses
- Want to build cash value using a life insurance policy
- Want to provide funds for estate taxes
However, Term Life Insurance is likely a better option if you:
- Want life insurance to cover a specific financial concern, such as replacing your income, paying off the mortgage, or leaving the funds needed for education costs.
- Are searching for the most affordable coverage and don’t need it indefinitely.
Buying Whole Life Insurance as an Investment
Most financial advisors are tight-lipped about using whole life insurance as a means for investment since they are usually touting investment products of an alternative nature. However, they will acknowledge that the following are two crucial aspects of using whole life insurance for investment:
You get tax-deferred growth.
You will not need to pay any taxes on dividends, interest, or capital gains associated with the cash value feature of your policy until you withdraw the funds. There are also tax benefits associated with different retirement products, such as 401(k)s, 403(b)s, and IRAs.
Investing in a permanent form of life insurance for tax purposes makes perfect sense, especially if you’re maxing out your contributions to your existing retirement accounts.
You can borrow against the cash value?
Exactly! If you are in need of the funds to pay for college tuition or purchasing a new home, you have the ability to borrow against the cash value of the whole life insurance policy. Comparatively speaking, if you want to withdraw funds from a tax-advantaged retirement plan like a 401(k) for purposes other than retirement, you may have to pay penalty fees. Retirement plans such as the 457(b) make it difficult and nearly impossible to withdraw money for purposes other than retirement.
You can get accelerated benefits if you get sick.
In cases of serious health crises, such as stroke, end-stage renal disease, heart disease, or invasive cancer, it’s possible to receive between 25% and 100% of your whole life insurance policy’s death benefit. These accelerated benefits can then be used to pay any outstanding medical bills or to enjoy your final months with your family.
In Conclusion
As with any life insurance product, the advantages and disadvantages are typically a result of the financial risk you need to mitigate. If your need is temporary and your budget is tight, term life insurance will probably be your best solution but if you are looking for permanent life insurance coverage with a cash component that will allow you to accumulate wealth, whole life insurance can meet those needs and many more.
For more information about Whole Life Insurance and how it works, contact us at your convenience through our website or call us at 866-691-0100 during normal business hours.
By definition, whole life insurance provides coverage that lasts your lifetime provided that your premiums remain current. Oftentimes referred to as guaranteed whole life insurance, this policy promises that your premiums will remain fixed throughout the life of the policy.
Additionally, whole life insurance provides tax benefits and a cash value feature that grows over time. This policy is perfect for those consumers seeking the benefits of life insurance coverage, as well as a cash value feature that acts as an investment vehicle. Here, we’ll discuss how does whole life insurance work.
Top Five Whole Life Insurance Benefits
Rather than discuss the complexities associated with whole life insurance policies, let’s get straight to discussing their benefits. Actually, the benefits are what make whole life so popular in the first place.
Whole Life Insurance versus Term Insurance
Most shoppers for life insurance struggle with the choice of buying term life insurance versus whole life insurance. It’s a huge choice in the decision-making process.
Deciding which policy to buy should be based on the reasons that you need life insurance in the first place. If you’re concerned with financial struggles during a certain time period, term life insurance can help with that. For instance, term life insurance is the better option if you’re looking to cover mortgage payments or college tuition for a child. There’s simply no reason to purchase insurance that you won’t use later down the road.
Nevertheless, if it appears that your need for life insurance extends indefinitely, you may want to take a look at the lifetime coverage provided by more permanent forms of life insurance.
You may want to contemplate whole life insurance if you:
- Wish to leave an inheritance to your beneficiaries
- Want to fund a trust for your children
- Need funds left for your family to cover final expenses
- Want to build cash value using a life insurance policy
- Want to provide funds for estate taxes
However, Term Life Insurance is likely a better option if you:
- Want life insurance to cover a specific financial concern, such as replacing your income, paying off the mortgage, or leaving the funds needed for education costs.
- Are searching for the most affordable coverage and don’t need it indefinitely.
Buying Whole Life Insurance as an Investment
Most financial advisors are tight-lipped about using whole life insurance as a means for investment since they are usually touting investment products of an alternative nature. However, they will acknowledge that the following are two crucial aspects of using whole life insurance for investment:
You get tax-deferred growth.
You will not need to pay any taxes on dividends, interest, or capital gains associated with the cash value feature of your policy until you withdraw the funds. There are also tax benefits associated with different retirement products, such as 401(k)s, 403(b)s, and IRAs.
Investing in a permanent form of life insurance for tax purposes makes perfect sense, especially if you’re maxing out your contributions to your existing retirement accounts.
You can borrow against the cash value?
Exactly! If you are in need of the funds to pay for college tuition or purchasing a new home, you have the ability to borrow against the cash value of the whole life insurance policy. Comparatively speaking, if you want to withdraw funds from a tax-advantaged retirement plan like a 401(k) for purposes other than retirement, you may have to pay penalty fees. Retirement plans such as the 457(b) make it difficult and nearly impossible to withdraw money for purposes other than retirement.
You can get accelerated benefits if you get sick.
In cases of serious health crises, such as stroke, end-stage renal disease, heart disease, or invasive cancer, it’s possible to receive between 25% and 100% of your whole life insurance policy’s death benefit. These accelerated benefits can then be used to pay any outstanding medical bills or to enjoy your final months with your family.
In Conclusion
As with any life insurance product, the advantages and disadvantages are typically a result of the financial risk you need to mitigate. If your need is temporary and your budget is tight, term life insurance will probably be your best solution but if you are looking for permanent life insurance coverage with a cash component that will allow you to accumulate wealth, whole life insurance can meet those needs and many more.
For more information about Whole Life Insurance and how it works, contact us at your convenience through our website or call us at 866-691-0100 during normal business hours.
In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs. Being independent, I represent many highly-rated insurance companies and, because I am not beholden to any one insurance company, my focus is to find the right company and policy for each individual client.
I believe that when people shop for insurance (or anything else, for that matter) on the Internet, they are looking for a simple, non-intrusive, non-pressure method of doing so. I strive to treat my prospective clients with the utmost respect and I believe an educated prospect can make the right decision without sales pressure.