Whole life is regarded by many to be a "permanent" kind of life insurance. That's because most kinds of whole life give you lifetime coverage, as long as you keep on paying the premiums each year. A lot of people appear to take comfort in the relative steadiness of whole life premiums and benefits. With what seems to be the preferred kind of whole life insurance, you'll pay the same premium amount every year, your whole life long or occasionally until the contract matures.
You might also find it reassuring to know that whole life insurance is well established as a means of growing cash value. Some people view this kind of policy as a readily available cash reserve. No matter what the cash value of your whole life policy is, you can borrow money against it. Remember, though, that any amount you don't pay back will reduce the death benefit by the loan amount plus fees.
We'd love to meet with you and discuss whether whole life insurance is your best insurance option. We're here for you, no matter where you are in the Central Florida area. Just contact Sun Coast Legacy Advisors.
What is Whole Life Insurance?
A whole life insurance policy may be a great selection if you’re considering purchasing life insurance for long-term goals. This type of policy can provide a built-in savings element. It allows you to build cash value and can be an integral part of your estate planning. You would consider whole life insurance policies when looking for insurance you’ll keep your entire life.
Naturally,, paying premiums for the rest of your life is part of the cost with traditional whole life insurance policies. But there are some kinds of whole life insurance that may be paid in full in advance – including products that can be purchased with a one-time payment.
There are two main types of whole life insurance policies that are offered: non-participating and participating.
A non-participating policy has a level premium and fixed face amount forever. It offers the advantage of fixed costs (so you can budget) and fairly low premium payments. A non-participating policy does not pay dividends.
A participating whole life policy pays dividends that are the result of the favorable performance of financial vehicles. Dividends can be paid in cash or may be used to reduce your premium payments. Cash dividends can also be used to purchase additional insurance to increase the face amount of the policy.
Our professional insurance agents can help you determine which sort of whole life insurance policy might be best to meet your life insurance needs. Contact Sun Coast Legacy Advisors today so we can go over your goals and address your concerns about whole life insurance coverage.
Can I Borrow Money against My Life Insurance?
Life insurance loans are usually used to help with home, college, or unexpected medical expenses. If the insured passes away before the loan is settled, the balance owed plus any applicable interest is deducted from the death benefit amount. A loan lets life insurance policyholders to gain access to the cash value of their policies without giving up their insurance coverage. You can usually borrow money against any permanent life insurance policy that increases in cash value, which is one of permanent life’s advantages over term life insurance. It is important to know that any such loan needs to be paid back with interest.
Loan interest rates differ by state and by insurance company, and particular details are usually spelled out in your specific life insurance policy. The process is simple. It normally entails notifying your agent or broker and just requesting the loan. Depending on your particular life insurance company’s policy, you might have to make the request in writing.
The taxation of cash-value distributions from benefits of your permanent life insurance policy will vary if the policy is a Modified Endowment Contract (MEC). If the cumulative premium payments go over certain amounts specified under the Internal Revenue Code, your policy will become a MEC. If your policy is a MEC, any death benefit provided under the contract will remain income-tax free, but you might be subject to additional taxes and penalties if there are distributions from the policy. Both MEC and Non-MEC policies allow cash values to grow tax-deferred. It is important to note that a Non-MEC permanent life insurance policy will be taxed more favorably than a MEC when a distribution is taken from the policy.
Contact Sun Coast Legacy Advisors today and discover more about how you can use a benefit of your permanent life insurance policy to gain access to cash through a loan. We’re ready to help you!