Whole life is permanent insurance protection that protects you for your whole life, from the day you purchase the policy until you die, as long as you pay the premiums. Whole life can be a solid foundation upon which to build a long-term financial plan because it guarantees lifetime protection for your family or business.
Whole life insurance provides basic insurance protection, plus:
- Mortgage protection: Benefits can be used to help pay off mortgages and other outstanding debts in the event of a premature death.
- Estate preservation: Whole life insurance can provide funds to cover estate expenses and help avoid the need to sell assets and or borrow money to cover these expenses.
- Retirement funding: Cash values can be accessed through policy loans or surrenders to supplement a retirement income. Loans will reduce the death benefit.
- Charitable giving: A whole life insurance policy can enable you to make a significant donation to your favorite charity upon your death.
- Business needs: Whole life can be an attractive executive and employee benefit and a means to assure a business’s financial future.
Generally after the first year, the policy begins to accumulate cash value. The amount of cash value in your policy usually increases every year. Cash values build on a tax-deferred basis. This money can be used to help purchase a home, fund a child’s education, supplement retirement income, or for any other purpose. You may also choose to leave it in the policy and allow it to grow. The policy’s cash value may be accessed through policy loans or withdrawals which will reduce the death benefit.
A whole life policy can earn dividends, which can fluctuate from year to year. Dividends are determined by the company each year and are not guaranteed. When a dividend is payable, you may choose to take it in cash, use it to purchase more insurance or to pay or reduce your premiums.
When you die, the company will pay your beneficiaries the death benefit, usually the face amount of the policy plus any dividends. This money is generally received by the beneficiaries free from federal income tax.