Whole life insurance provides permanent life insurance, which provides lifelong coverage. For those looking for lifetime coverage and a way to increase their investments, whole life insurance could be the answer, though there are many things to take into consideration. Below, we’ll discuss what to consider and who to call when you’re ready to compare your options.
Whole life offers policyholders a unique way to secure their assets while investing in an account. Accounts are funded by premiums, which are set up at the beginning of the contract. With each premium paid, part of the amount goes to paying the premium while the other goes to the cash value, an amount that policyholders can access and withdraw or take out a loan from.
Along with life insurance and a cash value, whole life insurance comes with a few guarantees, including:
In most cases, those looking for life insurance are attracted by whole life insurance because of the cash value. This is an amount that is meant to grow over time, accessible by policyholders at any time. The amount that’s accrued over time is not subject to taxes, although it starts to differ when withdrawing or taking out a policy loan.
Whole life insurance lasts for a lifetime, unlike other types of life insurance like term life insurance. Over time, as long as the premium is paid, the cash value increases. It’s accessible, though only free from taxes if the amount withdrawn is less than the initial premium.
The cash value is accessible via a policy loan or via withdrawal, though the amount that policyholders take out is subtracted from the death benefit. That means that beneficiaries will receive less unless it’s paid back.
Accessing the cash value is a great way to secure funds during financially unstable times or to use investments toward something in business. The fact that the cash value is tax-free makes it a huge benefit, though policyholders will have to pay back their loan with interest to keep their death benefit the same.
Policyholders can choose a withdrawal or a policy loan, even if it does take away from their death benefit. It could be a better option as an investment or for retirement funds for the future.
Beneficiaries are those that receive the death benefit and the cash value upon the death of the policyholder. Typically, policyholders choose loved ones like their spouse or their children, though they are not limited to just them.
When choosing a beneficiary, policyholders should consider their loved ones and the assets they want to secure. Additionally, they need someone that’s going to take charge, making sure that all of their final wishes are fulfilled and that everything and everyone they wanted to care for is cared for.
Instead of just choosing one, policyholders should choose more than one so that, in the event, the first choice cannot fulfill their requests, another can step in and start the process. Before taking out a life insurance policy, it’s a good idea to think about beneficiaries, as the insurance companies are contractually obligated to pay them, no matter what the circumstances.
Whole life insurance lasts for the duration of your life and does not expire, unlike term life insurance. As long as all premiums are paid, the policy will remain, collecting cash value or, in the event of death, paid out to beneficiaries.
One thing to note is that, in the event of a death, most insurance companies will only pay out the death benefit to beneficiaries. They will use the cash value to pay off premiums, interest from loans, and fees, with the rest going back to them if not claimed.
Some companies will allow you to choose a beneficiary to collect the cash value, though others may not. It’s something to keep in mind and, if you risk losing your cash value, it’s better to take out a loan or withdraw beforehand.
One of the downsides for many looking for a policy with a tight budget is that whole life insurance tends to be expensive. Term life insurance is the way to go if you’re looking for something more affordable, though it just depends on what you want out of your life insurance coverage.
Whole life insurance is not a one-size-fits-all policy and is determined by a number of factors that changes the cost per individual, these include:
In the event that policyholders want to cancel, they have a few options to choose from. Unlike other policies, they cannot just stop paying, and have to either choose one of the following options:
When choosing life insurance, there is a lot to consider, which is why you should work with a professional. Give Sim a call to find out if whole life insurance is right for you and how you can maximize your benefits by working with your cash value and/or additional life investments.
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