What You Need to Know About Whole Life Insurance
More than 70 percent of people say that they need life insurance, yet only 59 percent are covered.1 That may be because there are so many options to understand and choose from. This article looks at the specifics of whole life insurance.
It can be part of your long-term financial plans
A Whole life insurance policy may be helpful if you’re looking for long-term coverage to help protect your family or cover your debts in the event of your death. It can be more beneficial if you are younger and looking to be proactive in your insurance coverage needs. This is because polices secured by younger, healthier groups tend to cost less than as you age. The downside is that whole life insurance policies may have higher premiums and can be more complex.
If you are looking for an added layer of financial security in the future, you may consider a whole life plan. Policies can be cashed out at any time – meaning it isn’t only payable in the event of death. So, it’s not only an insurance option to protect your loved ones, but it can be used for long-term savings or retirement. Any policy withdrawals, loans and loan interest will reduce policy values and benefits.
While other types of life insurance could be a fit too, whole life is different for a few reasons.
It’s tax deferred
As whole life insurance policies grow cash value, they do so tax deferred. This means that the cash value that builds up isn’t counted toward your taxable income. This allows your savings to go up without increasing your tax liability. This is part of the reason why some financial advisors recommend whole life insurance as a part of a healthy financial portfolio. Any interest you receive from life insurance proceeds are taxable. Consult with a professional tax and/or legal advisor before taking any action that may have tax or legal consequences.
It makes a great gift
While it may not be on the top of their holiday wish list, the gift of some financial security will be one your children or grandchildren can be thankful for as they grow. Whole life insurance policies can be purchased in a child or grandchild’s name and given as a gift. Your loved one can choose to keep the policy or cash it out at a later date. A gift you give today could help them through a hardship in the future or provide them with some security throughout their life.
Whether you are purchasing whole life insurance for yourself or for someone else, finding the right policy starts with identifying and calculating your needs.
SOURCES:
Life Happens. Web page: Life Insurance – Who Needs It December 12, 2017, from http://www.lifehappens.org/insurance-overview/life-insurance/who-needs-life-insurance/.
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