Investing in a properly structured permanent Life insurance policy can help you protect your family while also enabling you to build savings in a tax-advantaged account. While the principal value of Life insurance is a death benefit as a source of income replacement, certain policies, such as Whole Life insurance, also have an investment component that may accumulate a cash value.
Whole Life insurance is a contract designed to provide death benefit protection over an insured’s entire lifetime or to the policy’s maturity date. Premium Payments can be made on a monthly, quarterly, semi-annual, or annual basis. Single premiums and 10- or 20-pay premiums are also available. The policy provides financial protection for your family in the form of a tax-free death benefit after you’re no longer here. The payout can be used to help loved ones cover the cost of mortgage payments, car payments, college tuition, credit card debt, and other expenses.
Whole Life insurance also has a cash-value component. With each premium payment you make toward your policy, a portion of it gets put aside for the future. As long as you continue paying the premiums, the policy’s cash value builds up steadily over the years on a tax-deferred basis. You can leave this money alone and watch it grow or borrow against it and pay it back with interest. For example, you can use the money to supplement your retirement savings or for emergencies. Additionally, you can use the money to enhance your estate so you can transfer your accumulated wealth to your heirs, or to boost your philanthropic contributions by naming your favorite charity as a beneficiary to receive monies upon your death.
Depending on the policy and insurer, you may also receive dividends.
How much Whole Life insurance you purchase will depend on your financial situation as well as your needs and goals. When considering the amount of coverage to buy, look at how much money your loved ones would need on a short and long-term basis. If you have a child, you may want the amount to help cover him or her from infancy to college graduation. If you have a partner, you may want the coverage to help carry him or her through retirement.
You can also purchase additional riders to enhance your Whole Life policy. Some available riders include but are not limited to:
- The Future Insurability Rider: Provides an option to add more coverage and cash value over time as you need it without having to prove good health
- Accidental Death Benefit: Provides an additional payment should death occur as the result of an accident
- Long Term Care: Allows the cash value to be used for prolonged illness with access up to a percentage of the policy value
- Flex Term Rider: A Term Life policy can be added for additional coverage for a specified period of time
Owens Group Life & Health professionals can assist you in determining if Whole Life insurance is right for you and your family. We will also discuss the types of policies available, including Guaranteed Whole Life vs. Universal Life, with you and advise you of how each one works so you have a clear understanding of the benefits of each. Please contact Robert Owens or Denise Kligman for a complimentary consultation at 800.26.COVER.