5 Key Benefits of a Whole Life Insurance Policy

There are two broad categories of life insurance – whole life and term life. Essentially, term life insurance runs for a specified period of time, say 10 or 30 years and can be renewed depending on the terms of the policy. A whole life insurance policy, meanwhile, runs for the rest of your life.

Recently, term policies have been attracting more attention with consumers seemingly convinced that whole life insurance policies offer little value. We aren’t going to take sides on this. However, we believe that it’s in your best interest to make an informed decision.

So, we want to bring your attention to several key advantages of whole life policies to help you make the right decision.

Enjoy permanent cover

As the name suggests, whole life insurance covers you for the rest of your life. Even if you buy the cover when aged 25 and live to 80 years, you will be covered for all those years. This is different from term life policies that cover you only for the duration of the term, say 20 years. Once the 20 years elapse, you’ll lose your cover and may be unable to obtain a new cover at a good price because of your age and health.

You’re guaranteed a fixed death benefit

As long as you pay your premiums in full, your listed beneficiaries are guaranteed a fixed death benefit upon your demise. This is a major advantage considering that benefits from other policies tend to change. Universal life insurance benefits, for instance, change over time depending on premium payments and personal choices made by the policyholder. Usually, this means that you’re not completely sure how much your beneficiaries will collect when you die. With whole life insurance, you live knowing what they stand to receive.

The cash value component is a major plus

In addition to a fixed death benefit, whole life insurance also comes with a Cash Value Component (CVC) that gives it a distinct advantage. This cash value component not only grows at a fixed rate but can be used as a source of savings or to finance short-term goals. Also, the CVC can be obtained as a cash withdrawal if you choose to surrender (terminate) your insurance policy.

Tax benefits

Whole life insurance is also famous for its tax benefits. The cash value component of the insurance grows tax-free, making it an excellent saving vehicle. If you’ve exhausted your tax-deferred investment options, for instance, you can turn to the CVC to pursue your investment goals. It gets better; you can even use the CVC to pay for your insurance with pre-tax dollars.

Whole life insurance can be combined with other investment vehicles

It’s a somewhat complicated process, but yes, whole life policies can be combined with other investment vehicles such as real estate, private lending, and auto financing to accelerate your wealth.

Hopefully these five advantages have tilted the scales in favor of whole life insurance policies. They are a great option.