Whole life insurance is a permanent type of life insurance coverage that has a cash value accumulation. This policy provides protection till the age of 100 at which point your policy “matures.” What that means is your cash value will be equal to your death benefit. If you reach age 100 and you are still alive, your whole life policy will provide a living benefit. Meaning you will be given the money equal to your cash value to use for anything you please. Keep in mind If you choose to take out the cash value it becomes taxable income, but if its left as a death benefit it will not be taxed.
Cash value is a savings element that builds up over the age of the policy. As it acquires interest the cash value rises and it is designed to equal the death benefit at age 100. That is not to say that you are not allowed to tap into your cash value before then. You are given the ability to “borrow” against the policy. It’s a loan that there is no time limit to pay back. If you happen to pass away before paying it back the cash value you borrowed simply comes from the top of the death benefit with up to a 10% penalty from the amount borrowed. So it looks something like this:
Amount borrowed +.10(Amount Borrowed) = Death Benefit
Who is Whole Life Insurance for?
Whole life insurance is for someone looking for a guaranteed cash value accumulation after maximizing all other guaranteed investment options. It is one of the most expensive life insurance products out there because of the guarantees it provides in terms of investment, death benefit and level premium. It is not recommended to pursue whole life as a replacement for other investments so we always recommend talking to your financial planner for other options. Whole life often gets confused for being the only permanent coverage but there are much cheaper alternatives for permanent life insurance if you are looking for pure death protection.
Whole life insurance has a lot of details and options that can be discussed with a knowledgeable agent. If you are interested in learning more feel free to call us at 888-492-1967
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