Benefits of Whole Life Insurance
Most people don’t give much thought to life insurance. For some, it’s about what comes “after” and that’s not something the average person is comfortable thinking about.
However, before you make your life insurance decision, it’s a good idea to explore the potential immediate and long-term benefits of a whole life insurance policy rather than a term life policy. Term-life insurance may look like a better value up front but the benefits of a whole life policy are undeniable.
Lock in Prices While You’re Young
The younger you are when you get your whole life policy, the better the pricing. You get to lock in lower prices at a time when your premiums are lower and those prices never increase. In contrast, term life policies lock in prices for a specific term and when that term ends, you must get a new policy and the prices will almost certainly be higher.
The benefit of locking in lower rates is huge, especially when parents acquire whole life policies for children at young ages. Those prices are locked in for life so they will never increase. Term life policies, after a certain age, can become quite costly.
Builds Cash Value
Even better, you can borrow against this cash value. It’s a much more favorable loan than you’ll get elsewhere and it can be substantial after you’ve had the policy for several years. You don’t even need to go into explanations over why you need the loan. The policy itself serves as collateral.
Tax Benefits of Whole Life Policies
No one likes to pay taxes. Saving money on taxes is always a perk worth remembering. Whole life policies allow you a few tax benefits to keep in mind while comparing policies.
- You pay no taxes on the cash value that accumulates on your policy.
- You are not required to pay federal income tax on money you borrow from your policy’s cash value.
- Your loved ones will not be forced to pay estate taxes on your life insurance benefits if you transfer ownership of the policy to someone else (or a trust) four or more years prior to your death.
- Beneficiaries are not required to pay federal income tax on the money they receive from insurance disbursements.
If your plan is to leave something behind for your family after you’re gone, a whole life policy is the best way to plan for a sustainable policy. The cash value, if left to accumulate, can help you pay for unexpected emergencies, pleasant surprises, and even take once in a lifetime vacations.
Discuss your options with your insurance agent today to find the policy that best meets your long and short-term life insurance needs.