- Death Benefit: This is a guaranteed sum of money paid to your beneficiaries upon your death. The death benefit amount is fixed in the policy and remains the same throughout the life of the policy.
- Cash Value: This is the savings component of whole life insurance. A portion of your premiums goes towards building cash value, which accumulates over time and earns a fixed or participating interest rate.
Benefits of Whole-Life Insurance
Here’s why whole life insurance might be a good fit for you:
- Guaranteed Lifetime Coverage: Unlike term life insurance, which expires after a set period, whole life insurance remains in effect for your entire lifetime as long as premiums are paid. This provides peace of mind knowing your loved ones will be financially protected no matter when you pass away.
- Cash Value Accumulation: Whole life insurance allows you to build cash value over time. This cash value can be accessed through various options like policy loans or withdrawals. You can use this accumulated money for various purposes, such as retirement planning, paying for a child’s education, or covering unexpected expenses.
- Predictable Premiums: Whole life insurance typically comes with fixed premiums. This means you’ll pay the same amount each year, regardless of your age or health changes. This predictability can be helpful for budgeting purposes.
- Tax Advantages: The cash value in your whole-life insurance grows on a tax-deferred basis. This means you won’t pay taxes on the interest earned until you withdraw the money. Additionally, if you withdraw the money through a loan, it may not be considered taxable income. (It’s important to consult with a tax advisor to understand the specific tax implications for your situation.
Read: What Is Gap Insurance? And How It Works
Things to Consider with Whole Life Insurance
While-whole life insurance offers several benefits, there are also some factors to keep in mind:
