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Whole Life Insurance is the simplest form of permanent life insurance. It features lifelong protection with guaranteed premiums, death benefit, and cash value. Permanent Insurance is more expensive then term insurance but is guaranteed until the person dies or the policy is cancelled.
Some positive features of Whole Life Insurance are:
- Fixed annual premiums that will not increase
- Guaranteed death benefits
- Cash Value accumulation that grows tax-deferred
- You can take out the cash value of any insurance bought with dividends or any dividends left to earn interest. You can also borrow against the cash value in your policy and not have to worry about the policy lapsing.
- Annual dividends that can be used to purchase more insurance or pay premiums
- Dividends can help you keep up with inflation by purchasing more insurance
- As you get older and have less access to income these dividends can help pay a portion or all of the premiums needed to keep the policy active.
- Tax advantages
- As with other insurance policies the proceeds from a Whole Life policy are free of federal or state income taxes. With the right planning they will also be free of estate taxes.
- The annual gains associated with the cash value will grow tax-deferred allowing your account to grow faster then it would be in a taxable investment account.
- There can also be several riders associated with Whole Life policies including but not limited to Paid up Additions Rider, Long Term Care Purchase Option, and Disability Waiver of Premiums Benefit. These riders can differ amongst insurance carriers and specific policies.
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