WHAT ARE THE BENEFITS OF WHOLE LIFE INSURANCE?
Certain aspects of whole life insurance can make it an appealing choice.
- Your premiums are fixed and will never go up, regardless of market conditions.
- You may be able to withdraw funds or take out a loan.
- Your death benefit is guaranteed long as you make the required payments.
WHOLE LIFE INSURANCE PROVIDES FIXED PREMIUMS AND FIXED DEATH BENEFIT
In most cases, the premium and death benefit stay constant for the duration of a whole life insurance policy, says the III. A universal life insurance policy, on the other hand, may offer the option to adjust your premiums or death benefit over time.
Because whole life insurance gives you fixed premiums and a fixed death benefit, you won’t have to worry about increased premiums as you get older. And, your loved ones will also know how much to expect when your life insurance benefit is paid out after you pass away.
WHOLE LIFE BUILDS CASH VALUE
A whole life policy can serve as a source of emergency funds for you if something goes wrong, or you may be able to take out a loan against the policy. That’s because a portion of each premium payment you make is funneled into a savings component of the policy called the “cash value.”
Over time, the cash value of your policy increases, and you may have the option to withdraw funds or borrow against it. The rules on how and when you can do this vary by company and policy. Your insurer may also offer guidelines to follow so that you don’t inadvertently reduce the policy’s death benefit or create a tax burden.
HOW MUCH DOES WHOLE LIFE INSURANCE COST?
The cost of a whole life insurance policy depends on several factors, including how much coverage you buy and other things.
When it comes to paying your premiums, you’ll typically be able to make a fixed annual payment for a whole life insurance policy. Some life insurance companies may also offer the option to pay monthly, quarterly, or twice a year. Be aware, however, that paying premiums more frequently than once per year may incur additional fees.
ARE WHOLE LIFE INSURANCE PREMIUMS TAX DEDUCTIBLE?
According to the Internal Revenue Service, you cannot deduct premiums you paid for a whole life insurance policy on your tax return.
However, if your beneficiaries receive the death benefit from your policy, they likely would not have to pay federal income taxes on that benefit. However, any interest earned on top of the death benefit will likely be considered taxable income.
WHO SHOULD CONSIDER WHOLE LIFE INSURANCE?
So, when might a whole life policy make sense for you? Life Happens says a whole life insurance policy might be a fit for someone who likes predictability over time. This is because whole life insurance offers death benefit guarantees and fixed premiums.