What is Whole Life Insurance & How to Find the Best Whole Life Quote? Whole life insurance is traditional permanent whole life insurance that guarantees you a death benefit while providing cash value that you can use for any purpose while you are alive. As you pay your premiums, your money accumulates in an account and grows with interest (and, often, dividends) paid directly by the life insurance company. This is why whole life insurance is called life insurance, not the death insurance! Your premium will remain the same as long as you live, even if the life insurance company's costs rise. How do I access the cash value (equity) in the policy? As long as there is some cash value in the policy, you can draw on it anytime. Part of each premium payment accumulates in this account and continues to grow tax-deferred as long as the policy is in force. This benefit puts the "life" in your whole life policy. You can withdraw up to your original premium payments (this is also considered your cost basis) tax-free. You can also borrow growth or gain in your policy to avoid paying taxes on the gains. This makes whole life insurance an excellent savings vehicle forcollege savings, your own retirement savings supplement, or any other personal savings goals—all while maintaining the death benefit for the security of your loved ones. What are policy dividends and how do they work? Another benefit of whole life insurance is dividends. (In order for a policy to pay dividends, it must be a "participating" policy. "Nonparticipating" policies pay no dividends to policyholders.) All big life insurance companies have paid significant dividends every year. However, dividends are not guaranteed and are paid at the discretion of the insurance company's board of directors, depending on the company's expenses, how its investments fared recently, and the amount of money paid out in death benefits that year. If you get a dividend, its size is determined by a formula that factors in the policy series, the size of your policy, your age, and the number of years the policy has been in force. Once a dividend is paid, it becomes guaranteed. Your dividends are free from income tax, because they're considered a return of premiums you have paid. They can be taken in cash, used to pay some or all of the policy premium, reinvested to gain (taxable) interest, or used to buy paid-up additions to the policy ("paid-up" because no further premiums have to be paid). If you buy additions, you may surrender accumulated paid-up additions later and use the proceeds to pay regular policy premiums. What are the other advantages of cash value in whole life insurance? Cash value inside the policy is creditor-proof in most states. This makes whole life insurance a sort of doubleindemnity policy by (1) protecting your family should you die suddenly and (2) protecting your family should you be sued or have to declare bankruptcy. Whole life insurance with a solid insurance company has an average internal rate of return of 5% over the long term (you should think of whole life as a long term savings vehicle). In addition, by law, an insurance policy is tax-deferred, so you won't pay any taxes on that growth. And, under current tax law, you can take out a tax-free loan on a permanent policy. This adds an additional 2% to 2.5% onto your rate of return. Lastly, the monetary savings of the term insurance premiums that you don't have to pay—you are getting life insurance coverage, so you do not need to buy term insurance for the same amount—adds another 2% to 2.5%. So your average total annual rate of return will be about 10%. Furthermore, you get this return while avoiding stockmarket volatility, and if you pass away prematurely, you pass on all of the death benefits to your beneficiaries without income tax or estate tax (as long as your policy is structured in the right manner). There are very few savings and investment vehicles that will provide this kind solid a return with little volatility. What if, down the road, I can't keep up with premiums for my whole life insurance policy? If you ever feel that you are unable to continue premium payments—or that you have more coverage than you need and don't want to surrender or take a loan against the policy—you have a few options. Depending on the size of your cash value account, you can use your cash value to purchase "reduced paid-up insurance," whereby your coverage amount is lowered and no more premiums are required. Or you could turn the cash value into extended term insurance, which would keep your current death benefit but for a limited time. You should buy the amount of whole life insurance that your current and future cash flow can sustain. Cancelling a whole life policy a few years in is unwise. How to find whole life insurance quote online?
Traditionally, most people bought life insurance through an agent that would come to their home and present them with options. More often than not, the agent was working for only one company, sometimes using scare tactics and high-pressure salesmanship to guilt-trip a customer into buying a policy. With the Internet, consumers are now free to research whole life quote from different companies using unbiased sources of information. The Internet has long had term insurance quote comparisons available instantly, but without any expert advice. However, whole life insurance is more complicated, because it is permanent and includes a personal savings element. Finding the best whole life insurance quote online requires comparing companies and policies and getting counsel from a knowledgeable professional. BeamaLife.com is an industry-recognized website offering such counsel along with the best whole life quotes. Please call (877) 972-3262 to speak with our whole life insurance specialists or complete this short form for whole life quote comparison now!
Published on Sep 24, 2010
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