5 Features of Cash Value Whole Life Insurance
The ongoing coronavirus pandemic has put this world and its people in a lot of turmoil and adversities. We are staring at an uncertain future with no concrete solution in our sight.
During such difficult times, loss of jobs, business closures, and financial insecurities have made the matter worse. With very few options available, many people in the US are breaking their savings or dropping out of their insurance for not being able to keep up with premiums.
Despite the financial troubles due to COVID-19, experts suggest keeping life, health, and other insurances as a backup plan. However, from a practical perspective, it is only possible for people to keep their coverage, who still have their jobs or businesses running.
Others, who are still unemployed, if they can sustain on their $600 unemployment insurance until getting a job, can request their respective insurance companies to defer their premiums.
Most auto and life insurance providers have already put grace periods into effect. However, using a grace period will accumulate your total payable amounts.
In this post, we want to provide you insights into whole life insurance with cash value. In brief, full life insurance is a type of permanent life insurance that provides an insured person the lifelong coverage.
The underlying structure of permanent life insurance differs from term life insurance, which covers an insured person for a specific duration (generally between 10 and 30 years).
What is Cash Value in Whole Life Insurance?
Typically, the cash value feature in the whole life insurance gains interest or other return on investments and works as a tax deferral option.
In a cash value life insurance, your premium payments mainly have three usages:
- It goes into the cash value.
- It goes toward the cost that is insuring you.
- It goes toward fees for relevant policy.
In the end, only a part of your payment will go into the cash value.
Benefits of Whole Life Insurance
- The cost remains the same
The monthly premium amount that you pay to the insurance company will remain the same. Because of the same premium amount, you may potentially find them more affordable over a long period. The premium payments for the whole life in the initial years are higher than term life insurance. However, the benefits of full life insurance increase significantly as the years go by. When it comes to retirement planning, it means guaranteed availability of life insurance during the senior years, at a fixed cost.
- Potential of earning dividends
You may earn potential annual dividends from a whole life insurance policy if you buy it from a mutual insurance company. Although there is no guarantee of receiving bonuses, mutual companies share them with policyholders whenever possible. You can reinvest dividends into your policy to build the cash value faster. You can also use the bonuses to pay some of your insurance premiums.
Besides the benefit of leaving the tax-free insurance amount for your loved ones, the cash values of your insurance offer the advantage of tax deferral. You can take out a loan against the cash value when in urgent need of money. You need to pay the money back, or else it will reduce the total amount that your family will receive. While your property and other assets may have tax impact and possibly take time in probate court, it does not apply for life insurance. The life insurance money could help your family or estate to cover various essential expenses.
- Saving money for retirement days
You can use a whole life insurance policy to develop a supplemental retirement income. If you take such a plan earlier in your life, there will enough time to build up a substantial cash value. You can use that money to save taxes as part of your financial planning for retirement. The cash value of whole life insurance is subject to market fluctuations. When you start withdrawing the money, it may be tax-free. However, withdrawal of the cash value may affect the amount your beneficiaries will receive.
- Your beneficiaries will receive fixed benefits
A whole life insurance policy can help you leave a guaranteed amount for your surviving family members even when you will not be around, which is known as a “death benefit. ”You will always get this crucial financial protection by paying monthly premiums.
Before We Go
Does the concept of a whole life insurance policy make sense to you? If you prefer stability and financial security in the long run, this could be just right for you. It is because whole life insurance offers a guaranteed death benefit and has fixed premiums.
If you are thinking of buying a whole life insurance policy, it would be better if you talk to a company that will guide you well with different options available. This way, you can choose the life insurance policy that will work the best for you and your family. For details, give us a call at (650) 328-1000 or fill out the online contact form, and we will be glad to assist you.
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