Your family’s future security matters to you, and that’s why thinking about life insurance is so important. Typically, there are two main types of life insurance: term and whole life insurance. If your ultimate aim is to provide your family with financial security in the event of your untimely death, a whole life insurance policy may be ideal for you. In this blog post, we’re going to explain how whole life insurance works.
How Does Whole Life Insurance Work?
Whole life insurance is a type of permanent life insurance that provides coverage for the entire lifetime of the insured person.
A unique feature of whole life insurance is the cash value component. A portion of each premium payment goes towards building this cash value, which grows over time on a tax-deferred basis. The policyholder can borrow against this cash value while they are alive, but any outstanding loans will reduce the death benefit.
What You Need To Keep in Mind
One of the factors you need to consider when thinking about whole life insurance is that the cost of insurance is more expensive than with term life insurance. The reason for this is the policyholder is charged a premium which includes coverage for both the insurance amount and the cash value.
Whole life policies last until the policy holder dies unless they wish to cancel the policy. The payout progresses from the time the policy was taken out and is paid to the beneficiary on the death of the policyholder. In addition, the policyholder can borrow against the policy and receive partial payments from their policy’s cash value.
Another benefit of whole life insurance is that it is a strategy for tax planning. The cash value account’s income is tax-deferred. Nevertheless, if the policyholder doesn’t withdraw income from their policy, they avoid paying taxes on it. If the policyholder has a lower tax rate upon withdrawal of some of the funds, then it is beneficial to keep them in the policy.
Wrapping It Up
Whole life insurance’s main purpose is to ensure that policyholders have financial protection until the end of their life, and it is important to consider the features and benefits. In essence, its higher premiums go toward delivering death benefits and effectively investing into savings accounts.
The choice to obtain whole life insurance is dependent on your specific income, requirements, cash flow of savings, and tax strategy. When analyzing your family’s financial goals, ensure that you consider the policy’s features, flexibility, and cost.
Looking for Whole Life Insurance? Uniserv Is Here To Help
Whether it’s life insurance or business insurance, we offer a wide range of insurance solutions to protect the things you value the most.
We serve companies and individuals all over California. Call 888-698-6473 today or fill out the contact form to get the dependable protection you deserve.