E.F. Heagen & Associates

(949) 487-6711

Insurance Read Time: 3 min

A Look at Whole Life Insurance

Chart one

In exchange for fixed premiums, an insurance company promises to pay a set benefit when the policyholder dies, but also offers additional benefits as well. Whole life insurance policies can build up cash value — effectively a cash reserve that pays a modest rate of return, and the growth is tax-deferred. Guarantees are based on the claims-paying ability of the issuing company.

Chart two

Most whole life insurance policies allow policyholders to borrow a portion of their policy’s cash value. Access to the cash value can allow you to pay for things like college expenses, a home down payment, or any other needs you may have. Interest payments on policy loans go directly back into the policy’s cash value.

Chart three

When the policyholder dies, his or her beneficiaries receive the benefit from the policy. Depending on how the policy is structured, benefits may or may not be taxable.

Whether whole life insurance is the best choice for you may depend on a variety of factors, including your goals or circumstances.

When you borrow against this cash value of your policy, there are some important points to consider. Accessing the cash value of the insurance policy through borrowing — or partial surrenders — has the potential to reduce the policy’s cash value and benefit. Accessing the cash value may also increase the chance that the policy will lapse and may result in a tax liability if the policy terminates before your death.

As with all types of life insurance, several factors will affect the cost and availability of whole life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder may also pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Life insurance is not insured by the FDIC (Federal Deposit Insurance Corporation). It is not insured by any federal government agency or bank or savings association.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

The (Other) Talk: Preparing Your Parents for Retirement

The (Other) Talk: Preparing Your Parents for Retirement

For much of our lives, our parents are the ones who have to bring up uncomfortable topics. (Just think back — and squirm — to their birds and bees talk. Awkward, right?) But once we become adults, sometimes it’s our turn to start sensitive conversations.

Four Reasons Millennials Need an Estate Strategy

Four Reasons Millennials Need an Estate Strategy

Estate strategies for millennials may sound like less of a concern than retirement, but young adults should prepare now.

An Arm and a Leg

An Arm and a Leg

A visit to the hospital can be painful, for both your body and your wallet. Don’t let it be more painful than it has to be.

 

Have A Question About This Topic?







Thank you! Oops!

Term vs. Permanent Life Insurance

When considering life insurance, it's important to understand your options.

Gap Insurance for Leased Cars

If you’re thinking of leasing a new car, then you shouldn’t forget about gap insurance.

Pickleball in Retirement

Learn about the latest sport to sweep the nation with this informative article.

View all articles

Taxable vs. Tax-Deferred Savings

Use this calculator to compare the future value of investments with different tax consequences.

Federal Income Tax

Use this calculator to estimate your income tax liability along with average and marginal tax rates.

Home Mortgage Deduction

Use this calculator to assess the potential benefits of a home mortgage deduction.

View all calculators

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

Managing Your Lifestyle

Using smart management to get more of what you want and free up assets to invest.

5 Smart Investing Strategies

There are some smart strategies that may help you pursue your investment objectives

View all presentations

What You Need to Know About Social Security

Every so often, you’ll hear about Social Security benefits running out. But is there truth to the fears, or is it all hype?

The Cost of Procrastination

Procrastination can be costly. When you get a late start, it may be difficult to make up for lost time.

The Independence of Financial and Emotional Well-Being

Greater financial and emotional confidence brings greater independence. Isn’t that what it’s all about?

View all videos