Whole Life Insurance Benefits


One of the most debated questions in the insurance industry is whether the benefits of whole life insurance outweigh those of less expensive term life policies. Some say the higher premiums could be invested elsewhere and yield a greater return. Others point out the built-in stability of whole life insurance, particularly when compared to volatile economic times. The consensus is the most important factor in making the decision is the financial goals of the individual looking to purchase a plan.

As mentioned above, the primary benefit of whole life insurance is the guarantees it provides for the rest of your life. So long as the policy is in effect, your family will receive the agreed pay out upon your death. Your coverage will last without interruption or recurring medical examinations, unless you decide to make changes in protection or value. This sort of financial security is attractive to many, as it removes all doubts about whether loved ones will be taken care of. The premiums and face value often remain the same until the age of 100 and coverage can be extended beyond that, in some cases.

The second feature that draws people to whole life plans is the cash value that can be built up over time. Part of the premium is set aside to allow the policy to act as a sort of savings account, allowing it to be used for unforeseen expenses in emergencies – like medical care during a chronic or terminal illness – or even to pay off any remaining premium. This cash value is tax-deferred, as well, meaning it is able to grow and only becomes subject to income taxes when it is disbursed. (Even then, some of your gains may not be taxable.) Some buyers use this as a means of paying for college, as the cash value is not considered in financial aid calculations like a 529 savings plan would be. However, it’s important to keep in mind any loans or withdrawals that have not been repaid will be taken out of the death benefit.

Lastly, the fact a whole life insurance policy pays dividends is one of the most sought-after benefits. Though these aren’t guaranteed, they can be a great tool to help the insured purchase more protection to keep up with rising costs, pay portions of the premium or supply extra income during retirement, if they choose.

Different companies provide other benefits for their whole life policies, in order to comply with federal and state insurance regulations. These variations can mean your plan is exempt from being considered an asset by creditors or during a lawsuit and even provide for premiums to be waived in the event of disability.

When it comes time to consider your options, it’s important to consult with more than just a trusted insurance agent. Talk with your accountant or financial planner to ensure your monetary needs will be met as the policy matures, particularly if you’re planning on using it as part of your retirement preparations. The biggest knock on whole life insurance comes from those who say it offers a minimal return on investment compared to other options, like 401(k) plans or Roth IRAs. If you do opt to make your policy part of your investment portfolio, be sure it’s chosen for the protection it puts in place instead of its potential yield and that it’s only a segment of a larger strategy.