How Beneficial Can A Whole Life Insurance Be?

When it comes time to purchase life insurance, there are always a lot of questions. Within the industry itself, there are competing claims that muddy the water, leaving one to wonder which type of policy is best for them. There are so many advantages of Whole life insurance over the less expensive term life options, though at greater cost. In the long run, the financial goals of the individual purchasing the insurance are crucial, as well as risk tolerance and income, to a lesser extent.
What draws most people to whole life insurance policies is the security they provide. For the entire life of the policy, premiums and face value are set in stone permanently. What this means is that, due to inflation, the policy will end up costing less as time passes. Your minimum agreed benefit and cash value will be paid out in the event of your death without any further medical examinations to determine insurability, unless you decide to alter the face value or protection clauses. (In most cases, though, it’s simpler to purchase an entirely new policy to cover the balance, if you decide you’d like more coverage.)
Over time, a whole life plan will build up a cash value that term life plans cannot. For those looking to utilize the policy as part of retirement planning, this is a major advantage. When the premium is paid, part of it will be put into the insurance company’s general fund and part will be set aside for the insured. In effect, the plan becomes a like a savings account or piece of real estate that develops a market value to support loans or pay other expenses in emergencies, such as medical care during a chronic or terminal illness. These loans or withdrawals will be repaid out of the death benefit if there are any remaining balances, but the ability to defer tax on these monies until they are disbursed is very appealing – and, even then, a portion of the gains may not be subject to income taxes.
Those funds placed into the insurance company’s larger pool give whole life insurance policies the added possibility of annual dividend payments. This feature is a bonus, as the availability of these extra funds will determine whether they are paid out or not in a given year. If they do, they are a major advantage to the insured, as they can help the individual increase the death benefit in the event of rising costs or for added protection. Some like to use them to cover part or all of premium payments or, in other cases, cash the dividends out for supplemental income during retirement.
There are a lot of differences from company to company and state to state, so be sure to check with a trusted insurance agent. Some whole life insurance policies are unavailable to creditors or lawsuits. Others have riders which stipulate the premiums must be waived if the insured suffers a partial or permanent disability. These advantages can be awfully tempting, which makes it all the more important to discuss them with qualified professionals, particularly your accountant or financial planner if you are planning on utilizing your whole life insurance policy as part of your retirement portfolio.

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