Advantages of a Whole Life Insurance Policy

A whole life insurance policy is the best way to ensure that your family will be protected in the event of your untimely death. Here's what you need to know about these policies and why they're worth the investment.

A whole life insurance policy is a type of permanent, lifelong insurance coverage, typically sold as a savings product by an insurer or bank. Theoretically, it allows customers to build cash value with guaranteed death benefits paid out over their lifetime. This article discusses some advantages of a whole life insurance policy. Read on to learn more.

Cash Value and Death Benefits

When you buy a whole life insurance policy, you're buying not only the promise of guaranteed lifetime death benefits (if applicable), but also the potential to build cash value (if applicable). This cash value is meant to grow over time as your life insurance premiums remain level. The cash value then becomes a sort of savings account within your life insurance policy that you can use for anything. You can withdraw it whenever you'd like, or you can leave it in there and let it continue to grow over time.

When you make withdrawals from your cash value, the death benefits are paid out. If you die before you are able to access the cash value in your whole life insurance policy, then your beneficiaries will receive the death benefits as soon as they're paid out of your policy.

The Death Benefits of a Whole Life Policy

As we've discussed, if you die before you can access the cash value in your whole life insurance policy, then the death benefits will be paid by your beneficiaries. The pay-out of those death benefits is based on the payment schedule within a whole life insurance policy and is typically an annuity that's calculated to last for about 30 years. So, assuming the policy lasts for 10 years and pays out $100,000 to your beneficiaries, your beneficiaries will be receiving payments of $2,000 per month. This may not seem like a lot in the grand scheme of things. However, over 30 years (when a payment would be monthly), that's $300,000. That's three times the amount you'd ever see if you just invested your cash value or if you just invested your whole life insurance policy right now.

How Can You Use Your Whole Life Insurance Policy?

There are two options for using whole life insurance policies: liquidating or building cash value (if applicable). Let's discuss these options in more detail.

Liquidating a Whole Life Insurance Policy

If you want to start using your whole life insurance policy right away, then you can simply withdraw the cash value portion of your policy. When you make these withdrawals, then the death benefits are paid out by your beneficiaries. Of course, if you die before you can access that cash value, then they'll be paid out eventually as soon as they're paid out of another whole life policy.

Building Cash Value (if applicable)

The alternative way to continue using your whole life insurance policy is to leave it intact and let it continue to grow over time. If you do, then your cash value will continue to grow until it surpasses the total amount of premiums that you've paid into the policy. Once this happens, your life insurance policy will then become a permanent whole life insurance policy. Essentially, at that point, the cash value is yours. Up until this time, you could withdraw it whenever you'd like. However, once it becomes a permanent life insurance policy and your cash value is growing over time (instead of decreasing over time), then you will no longer be able to withdraw from the original cash value that you contributed to the policy. Instead, you can only withdraw from the growth.

As your cash value grows over time, it is calculated as an interest rate that remains at a level of 2%. So, if you leave your whole life insurance policy in tact and it's been active for about five years and has built up about $100,000 in cash value (depending on the amount of premiums that you pay in), then it will start to pay out a payment every month of $200 per month. After this point, your policy will remain active for 30 years and still receive one payment every month from the cash value build-up.

Why Should You Invest in a Whole Life Insurance Policy?

If you're going to be purchasing life insurance, then you might as well do it right. A whole life insurance policy gives you the chance to build cash value that can be withdrawn over time or can simply continue growing into the future. If you invest in a whole life insurance policy, then you'll build cash value that will grow into the future and can be withdrawn for any reason (including for emergency funds), but it won't continue growing after that. So, rather than investing money elsewhere, this is an investment for your future – one that can protect your loved ones and provide for them after your untimely demise. If you have any other questions about whole life insurance policies, don't hesitate to contact our preferred agents at 800-626-3447. They're happy to answer your questions and provide you with a free quote.

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Conclusion:

While you have the option to withdraw money early from whole life insurance policies, you should always try to "rest" your whole life policy as long as possible. This will give you time to grow your cash value, which is yours no matter what. If you rest your whole life insurance policy and continue paying into it while it grows, then there's a good chance that the policy will eventually turn into a permanent whole life insurance policy and your cash value will be free from any withdrawals that are made after that point.

Advantages of a Whole Life Insurance Policy

Advantages of a Whole Life Insurance Policy

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