Here are some key features of whole life insurance:
Lifelong Coverage: Whole life insurance provides coverage for the entire duration of the insured's life. As long as the premiums are paid, the policy remains in force until the insured's death.
Cash Value Accumulation: A portion of the premium payments goes towards building cash value within the policy. The cash value grows over time on a tax-deferred basis, meaning you do not pay taxes on the growth as long as it remains within the policy.
Guaranteed Death Benefit: Whole life insurance guarantees a death benefit that is paid out to the beneficiaries upon the insured's death, regardless of when it occurs, as long as the policy is active and the premiums are paid. The death benefit is generally income tax-free.
Level Premiums: Whole life insurance typically has level premiums, meaning the premium amount remains the same throughout the policy's duration. Premiums are often higher compared to term life insurance, but they remain constant and do not increase with age.
Policy Loans and Withdrawals: Policyholders can access the accumulated cash value through policy loans or withdrawals. These options allow individuals to borrow against the cash value or make partial withdrawals if needed. However, any outstanding loans or withdrawals may reduce the death benefit if not repaid.
Dividends (in participating policies): Some whole life insurance policies are "participating," which means policyholders may receive dividends from the insurance company's earnings. Dividends can be used in various ways, such as purchasing additional coverage, reducing premiums, or accumulating cash value.
Whole life insurance is often chosen by individuals seeking lifelong coverage, cash value accumulation, and a fixed premium payment structure. It can be used for various purposes, such as providing financial protection for dependents, estate planning, or supplementing retirement income.