If you are looking to purchase life insurance at a young age, the low cost of term life insurance is attractive. Depending on your age, you can often purchase a substantial policy for a low premium payment. While term life should have a place in your financial portfolio, you also need to consider purchasing a whole life policy. Here are a few reasons why.
1. Cost Stays the Same
When you purchase whole life insurance, the amount of your death benefit and your age at the time of your application approval determines your premium. Unlike some insurance products, this premium does not increase as you age.
You can lock this premium in for life or the premium payment period by taking out a whole life policy at a young age. A locked-in premium means that, as you
age, what you are paying for your whole life premium will be much cheaper than what you would be paying if you took out the insurance at an older age.
2. Built-In Cash Value
Most people do not consider using their life insurance policy as a savings account, but it can be just that. Most whole life policies offer both a death benefit and a cash value accumulation. The cash accumulation grows annually at a rate guaranteed by the insurance company.
As long as you own the policy, you can use this cash value in a wide variety of ways. For example, you can take out a loan against the cash value of your policy.
Because you are borrowing your own money, you will not have to qualify for the loan as you would at a financial institution. You also do not have to repay the loan proceeds if you choose not to, but there may be tax consequences because of this.
Depending on your policy type and the actual cash value, your withdrawal may reduce your death benefit. Be aware, these loans are usually not interest-free, but the interest rates are usually attractive.
3. Tax-Deferred Growth
The cash accumulation in your whole life policy will grow as tax-deferred as long as it remains a part of your policy. Tax-deferred means you will not have to pay taxes on these funds until you get ready to withdraw them. Even then, the funds may be tax-exempt or taxed at a much lower rate than they would have been when first deposited.
You will need to work with your insurance agent to ensure your withdrawals are correctly structured to minimize or eliminate taxes.
4. Stable Investment
Although a whole life policy may not offer the highest rate of return compared to other investments on the market, it is one of the most stable investments. When you take out a policy with a reputable company, not only will you earn a guaranteed rate of return, but you may also benefit from dividend payments from the company. Dividend payments can increase your cash value and death benefit.
You do not have to worry about market crashes or inflation like you do with some other investments. Your cash value will grow slowly and steadily year after year. Stable growth can be a great way to produce another stream of retirement income.
5. Further Evidence of Insurability Not Needed
When you purchase a whole life policy when you are young and healthy, you do not have to worry about being declined due to health issues. Unfortunately, as you age, insurability becomes a genuine concern. Certain conditions, medications, and even professions can make you a high-risk investment for insurance
Some companies will refuse to insure you or will only insure you at much higher rates. Because whole life policies do not end or expire, you will not have to answer any future medical questions to qualify for continued coverage.
Family Insurance Centers will find a whole life policy to meet you and your family’s needs with one of the high-quality companies we represent. Give us a call today so we can help you get insured.