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7 Benefits of whole life insurance

Apr 13, 2022 4 Minute Read

It’s common to think about buying life insurance once you have dependents, like a spouse or children, who rely on you financially. And a simple, affordable term life insurance policy is a great solution for many families. However, once a term policy ends, you may no longer have the financial protection your family needs. That’s where permanent life insurance policies play a role. Whole life insurance, a type of permanent life insurance, offers a number of benefits, including coverage with no term limits and lasting security for the people close to you.

How does a whole life insurance policy work?

Whole life insurance is a permanent life insurance policy that provides lifelong coverage as long as you continue to pay the premiums. Whole life insurance also comes with a cash value component that grows over time. There are different types of whole life insurance policies to fit different needs, including senior whole life insurance and final expense coverage.

Final expense insurance, often called burial insurance, usually doesn’t require a medical exam and can cover funeral, cremation, or burial expenses. Other types of whole life insurance, include universal whole life insurance, which offers flexible premium payment options and limited payment whole life insurance, where premiums end after a set number years, but coverage continues.

Advantages of whole life insurance policies

Why choose whole life insurance? Many policyholders appreciate the flexibility and security of a lifelong policy. Some other advantages of whole life insurance are:

1. Peace of mind

Whole life insurance lasts for your entire lifetime, so you don’t have to worry about whether you’ll be covered after a certain age. You can relax knowing your loved ones’ finances will be taken care of if anything happens. Having whole life insurance also means not worrying about renewing your policy or thinking about changing it.

2. Lifelong protection

Whole life insurance means protection for your entire life. As long as you continue to pay premiums, the policy stays in force regardless of changes to health or lifestyle. So even as you age and your health potentially declines, you don’t have to worry about the term ending, and your family is always protected.

3. Cash value savings option

Many whole life insurance policies come with a cash value component. Every time you pay a premium, part of the money goes into a cash-value account. This account accumulates interest over time like a savings account, and it is tax-deferred, so it’s not taxed until you or your beneficiaries access it. You can borrow against the amount for any reason or surrender your policy and cash out the whole fund.

Before you decide to borrow or cash out a whole life insurance policy, it’s smart to consult with a tax professional to understand the tax implications.

4. Potential to earn dividends

Many whole life insurance policies have a cash value component that builds as you pay premiums. Some insurers also allow policyholders to earn yearly dividends based on the insurance company’s performance. You can choose to receive the amount as cash, add it to the account to earn interest, use the dividends to purchase additional insurance, or pay premiums. Dividends are usually tax-free.

5. Ability to flexibly borrow money

Did you know you can borrow against a whole life insurance policy? Policies with a cash value allow you to borrow against that value while you’re alive. Taking out a policy loan is like borrowing against a mortgage in that you borrow from the loan issuer and use the life insurance’s cash value as collateral.

You can use the loan on whatever you like, whether to cover bills or an emergency expense. However, keep in mind that if you fail to repay the loan, it could impact the life insurance benefit payable to beneficiaries at your death.

6. Level premiums

Your premiums stay the same throughout the policy with most whole life insurance. This predictability and consistency make budgeting easy.

7. Tax-free death benefit

Whole life policies’ death benefits are usually tax-free, which means your beneficiaries do not pay taxes on the money they receive. You can name any number of people, charities, or organizations as beneficiaries. It’s also smart to designate contingent or backup beneficiaries that receive a death benefit if a primary beneficiary dies, can’t be located, or refuses their payout.

Is whole life insurance a good idea?

The flexible benefits and long-term coverage of a whole life insurance policy make it worth it for many people. However, others looking for a more straightforward, affordable option might decide a term life policy is best for them. Fortunately, finding the right policy is easier than ever, and you can start by quickly getting a quote. You can also speak with an agent over the phone at (844) 482-1168.