The uncertainty of life can be best understood when an unexpected and unwanted incident happens and leaves you thinking that it could be something significant. What if you had died? What will happen to your family, kids, aging parents, and partner?
The question is scary, but the answer often comes as whole life insurance. Life can be as long as 80 years and up or can be cut short to 40, maybe even younger as some have unfortunately experienced, and you need security and an assurance of a better life for those who will be left behind.
If you have been considering whole life insurance, this blog post will help you determine whether it is a good investment choice.
For more details, consult our experts on whole life insurance in Phoenix.
What is Whole Life Insurance?
This section is for you if you need to learn about the whole life insurance policy concept.
Life insurance covers you for your whole life, i.e., your legal representative, or beneficiary, will receive the death benefit whenever you pass away. You pay premiums for life, or up to a certain number of years to “pay it up”, ensuring that your loved ones have satisfactory means to carry on your plans for them in life.
What makes this policy stand out is the cash value amount which grows with each premium and earns you interest. In case of need, you can also withdraw from this cash value.
But whole life insurance premiums are higher than other life insurance. For example, for a $500000 death benefit, you might need to pay a minimum of $500 a month, depending on your age and policy amount.
As long as you pay the premium, the policy won’t lapse. But does it mean that a whole life insurance policy is a good investment? Read on to find out.
Whole Life Insurance as an Investment Choice
While you may think about putting money in a savings account, you know how it works. So, consider the following points to understand how whole life insurance works as an investment choice.
Consult an expert for whole life insurance in Phoenix to guide you on the right path.
The Bright Side
Here are some of the advantages of investing in whole life insurance.
Tax-Saving
As you are aware that policy premiums are quite high for a whole life insurance policy, and a portion of it is also accumulated in cash value, people often wonder about the tax implications.
The good news is that even though the cash value is taxable, it is tax-deferred during the accumulation. It is only taxed when the policy is cashed out.
However, if you opt to take a policy loan based on your cash value, you can avoid paying taxes on the loan amounts.
In addition, any interest you earn on the cash value won’t be taxable as long as your money is not taken out as a withdrawal. It’s a win-win.
Assured Savings
The accumulated cash value in a whole life insurance policy is withdrawable, but certain restrictions exist. In addition, the amount is taxable once it is withdrawn and deducted from the surrender amount. It works in your favor and refrains you from withdrawing it. It results in assured savings for your kid’s college or other needs.
Lifetime Coverage
Lifetime coverage makes a whole life insurance policy more attractive. Universal Life Insurance also guarantees lifetime coverage, but the cash value benefit of whole life insurance gives it an upper hand.
Term policies that end after 25-30 years leave you with unsatisfactory maturity funds. On the other hand, a whole life insurance policy is a better investment if you have a dependent disabled child or spouse, huge estate taxes that you don’t want your heirs to burden with, or young children who will need money to carry on their education.
Medical Coverage
If you develop a medical condition, a whole life insurance policy can pay you as much as 100% of your death benefit to pay your medical bills and spend the rest of your days without any problem. However, these accelerated benefits are only available if you are diagnosed with a chronic disease, such as cancer, renal failure, nerve failure, etc.
The Dark Side
- You cannot manage your own portfolio. The insurance manager invests your money and declares dividends and profits. Though, you receive assured returns that are not affected by market conditions.
- The cash value is taxable when you withdraw it. Any borrowing against cash value is adjusted against the surrender amount.
- The premiums are expensive, and investing in a whole life insurance policy is not everyone’s cup of tea. It is advised to discuss it with your insurance agent.
Whole Life Insurance in Phoenix
Heroes Financial Group is the best choice if you want to invest in a whole life insurance policy. Along with this blog, our qualified experts can help you learn whether it is worth investing in one for you and your loved ones.
Contact us today for more information!
