Searching for the right type of life insurance policy is complex and time-consuming. Although there are two major options (term and life), there are also other life insurance options, such as universal, variable and indexed universal life insurance, to choose from. Whole life insurance is one of the most popular options because it lasts for the duration of the policyholder’s life. Premiums remain the same, regardless of the prevailing economic conditions of the time, and it will never expire as long as the holder pays the premiums. There are other benefits to whole life insurance policies as well. Consider the benefits of whole life insurance below and see whether this type of policy fulfills the needs of you and your family.
What Is Whole Life Insurance?
Whole life insurance, also known as permanent insurance, is a type of life insurance covering the person’s entire lifetime. This type of insurance remains active as long as the premiums continue to be paid.
One of the major draws of whole life insurance is, unlike term life insurance, a cash value is built up over the years. This can be used in the form of a loan for retirement funds, unexpected expenses or to cover part of a mortgage. There are some disadvantages, such as higher premiums and a smaller death benefit, but whole life insurance offers a simple form of whole life coverage for those who require it.
Benefits Of Whole Life Insurance
Whole life insurance has a range of benefits simply not found with other forms of life insurance. No other policy offers the same simple premium structure, tax advantages and ability to help families take their next financial steps. Before taking out any life insurance policy, it is important to speak to a professional insurance agent about the best option for you.
The Cost Is Guaranteed To Stay the Same
Whole life insurance is defined by its policy on premiums. The amount paid to the insurer every month never changes. In the long-term, this makes life insurance premiums more affordable because they are not impacted by inflation and other current economic factors. Although term life premiums are much cheaper in the short-term, whole life becomes far more affordable over time.
Fixed Benefits For Your Beneficiaries
The beneficiaries stated on the policy are guaranteed to receive a fixed benefit after the policyholder dies. This gives everyone peace of mind because this cash lump sum cannot disappear or decrease in value over time. While it is true that the fixed benefit is lower than with term life insurance, the permanent nature of this policy means the beneficiaries of the policyholder are guaranteed to receive the expected sum.
Tax-Advantaged Benefits
Additionally, the cash lump sum is tax-free, but many people are unaware that the cash value of the policy grows on a tax-deferred basis. The policyholder is able to borrow against the value. If the loan is unpaid, the outstanding amount will be taken out of the cash lump sum.
The payout from a whole life insurance policy is tax free. It is also easier for the descendants of the policyholder to access the cash lump sum than with other assets, such as real estate. Many whole life policyholders maintain the cash value of the policy to pay for their funerals or to cover estate taxes after their deaths.
Potential Dividends
Some types of whole life insurance policy may even come with dividends. If purchased through a mutual insurance company, policyholders may receive dividends annually. While these dividends are never guaranteed, they can be reinvested to further inflate the cash value of the policy. Alternatively, the dividends may be used to purchase additional life insurance, which will increase the total death benefit payable to the beneficiaries stated on the policy. There are no restrictions on how these dividends may be used. They can be put toward premiums or withdrawn as cash.
Retirement Funding
Whole life insurance policies may be utilized to build a second stream of retirement income. If the policy has a sufficient cash value, the money may be withdrawn in small amounts. The cash value is protected, so fluctuations in the wider global markets will not have an impact. In some cases, money may be withdrawn from the policy tax-free. Anyone doing this should speak to their tax accountant first.
Giving Money To A Charity Or Non-Profit
Many Americans choose to donate to the causes that matter to them. Charitable giving not only enables ordinary people to support worthy causes, but it can also offer income tax benefits while the policyholder is alive. This is particularly important in high-earning years. Charities and non-profits may also be listed as beneficiaries on the policy itself.
Pick An Insurance Company Who Knows the Benefits Of Whole Life Insurance
Whole life insurance is about so much more than planning for your death. When used correctly, whole life insurance can act as an additional stream of income, a highly secure financial asset and even as a vehicle for reducing your taxes. Find out more about the benefits of whole life insurance and how they might apply to your situation by speaking to the experts at MFE Insurance.