Raising a family means you should have some type of plan that protects your family members in case of your death or illness. While term life coverage is for a specific term and costs less, whole life coverage is for the policy holder’s entire life. It also provides several additional financial benefits.
Here is what you should know about the essential elements that make up a whole life insurance policy.
1. Whole Life Insurance Means What It Says
If you’re seeking one main plan throughout your lifetime instead of a specific time frame, then whole life coverage is a sensible choice for you. It can also provide tax-free death benefits to your family members. For many people, it works as supplemental retirement income since it builds cash value over time. Whole life insurance helps provide a safety net throughout your life in case you encounter an unexpected financial crisis.
2. The Cash Value of Whole Life Insurance Increases over Time
Whole life coverage works as an investment that grows in equity. Only a portion of your monthly premium goes toward life insurance coverage while the rest works like a savings account that grows in value. Some plans involve investments in mutual funds that earn dividends that can be reinvested in your policy or be paid to you as cash.
Building cash value can help your family in numerous ways, from paying for college to the downpayment on a new home. The cash can also help charities in the form of donations, which in turn have income tax benefits. You may want to donate money to causes you believe in as a way to give back to your community. What’s great about whole life insurance is that it never expires, and hence you can distribute the cash in various ways.
3. Benefits Include: Set Premiums, Death Payments, Tax-deferred Cash Growth
You get a fixed rate for life on your monthly premium when you go with whole life coverage. The fact that you can count on a fixed rate helps make future budgeting and forecasting easier. It doesn’t matter what age you are or your health status when you open a policy. Unlike most other types of insurance, whole life premiums always remain the same regardless of what happens with the economy or your health.
Another major benefit of whole life insurance is that you can borrow against it, although such debts will accrue interest while decreasing the benefits and cash value. Nevertheless, loans can be viable solutions in times of financial trouble or unforeseen emergencies, as can be seen in the current pandemic where many people are seeking loans to pay bills.
One of the most financially powerful aspects of whole life is that the benefits received by your loved ones receive will be tax-free. These assets will be easy for your beneficiaries to access after your death. Meanwhile, the cash value of your account will increase on a tax-deferred basis.
Factors for Choosing a Whole Life Policy
Since every family has a unique situation, you will have to decide whether term or whole life insurance works better for your needs. If the following scenarios apply to you, then whole life insurance can be a helpful solution:
● Seeking coverage for family members after your death
● Life insurance is part of your long-term financial plan
● Looking for a financial instrument that builds wealth
Your decision to buy a whole life insurance will also be shaped by your income level and your ability to pay monthly premiums.
These are the essential elements that make up a whole life insurance policy. If you’re looking for an experienced agency offering life insurance near you, contact the experts at East End Insurance Agency today. We are ready to assist you with all your coverage needs.