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Rethink Whole Life Insurance

   May 29, 2019     1042   Individuals & Families

If you’ve heard of whole life insurance, you may have heard some mixed messages about it. So let’s dispel the two big myths about whole life insurance – that it is inaccessible and expensive. Read on to learn more about everything whole life insurance can do beyond its core purpose to provide death benefits.

  • Accessible – Many types of whole life insurance can be as much ─ if not more ─ relied on while living. Accelerated benefits riders, for example, can provide access to the death benefit, while living, in the event of a qualifying illness.1 Withdrawal and loan features are also go-to liquidity options. So, one doesn’t have to die to benefit from a whole life policy. That’s total access.
  • Affordable – Whole life insurance premiums are built around how much coverage is needed, not one-size-fits all. What one pays is based only on how much protection is purchased. That’s true value.

Those boxes checked, whole life insurance has a lot more power under the hood to consider. Today, it can be a key component of many financial strategies, such as:

ACCUMULATE CASH VALUE, TAX-DEFERRED

Unlike term insurance, whole life not only provides survivor benefits, but it also builds guaranteed2 cash value. Plus, unique to whole life, many policies issue dividends that can be taken in cash, added back to policy value or used to help pay premiums. And the money grows tax-deferred until withdrawn. Death benefit proceeds, however, are generally tax-free to beneficiaries.3

POTENTIAL TO SUPPLEMENT RETIREMENT INCOME

If sufficiently funded, a whole life policy’s accumulation value can be accessed using policy loans and withdrawals4 to provide a reliable addition to your Social Security check and other income sources in your golden years.

PRESERVE A CLOSELY HELD BUSINESS

Small-business owners rely on whole life’s permanent protection to help plan for the unexpected.  Accelerated benefit riders can provide a resource if the insured owner experiences a qualifying terminal, chronic or critical illness. If the owner dies, whole life can support those who inherit the business with generally tax-free proceeds that can fund operating costs, pay-down company debt, or buy out the deceased owner’s share of the business from their family.

DIVERSIFY AN OVERALL PORTFOLIO

A smart financial plan spreads risk among different types of asset classes. The cash value of whole life insurance can be treated like a fixed or cash asset in your portfolio. This lends predictability and reliability to the portfolio, and may allow you to take more risk with other portions of your assets.

A FINANCIAL RESOURCE IN THE EVENT OF A SERIOUS ILLNESS

All the planning in the world can’t always see around corners. Whole life policies that include optional accelerated benefit riders offers access to some or all of the death benefit in the event of a qualifying terminal, chronic or critical illness. And, in most cases (with some state exceptions), the money can be used for things beyond healthcare, such as every-day bills, home modifications and household expenses. Moreover, whole life policies may also offer a waiver-of-premium rider that keeps coverage intact but requires no more premiums if the insure becomes permanently disabled.

PROVIDE COVERAGE FOR OTHER FAMILY MEMBERS

Whole life goes beyond covering just the policy owner. Many policies also have optional riders to provide the policy owner’s children with a separate term policy until they reach age 25. Some of the better policies also provide a guarantee that permanent insurance on the life of a second insured person is available when the primary insured dies.

Clearly, its benefits counter-punch its myths by far. Whole life insurance is still the same bedrock of permanent protection it always was. But the modern version of the product has very much adapted to the times to suit a range of today’s complicated financial needs and challenges.

 

  1. Payment of Accelerated Benefits will reduce the Cash Value and Death Benefit otherwise payable under the policy. Receipt of Accelerated Benefits may be a taxable event, may affect your eligibility for public assistance programs, and may reduce or eliminate other policy and rider benefits.  Please consult your personal tax advisor to determine the tax status of any benefits paid under this rider and with social service agencies concerning how receipt of such a payment will affect you.  Riders are supplemental benefits that can be added to a life insurance policy and are not suitable unless you also have a need for life insurance.  Riders are optional, may require additional premium and may not be available in all states or on all products.  This is not a solicitation of any specific insurance policy.
  2. Guarantees are dependent upon the claims-paying ability of the issuing company.
  3. Internal Revenue Code § 101(a)(1).  There are some exceptions to this rule.  Please consult a qualified tax professional for advice concerning your individual situation.
  4. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. The use of one benefit may reduce or eliminate other policy and rider benefits.

 

TC107875(0519)3