Guaranteed Whole Life Tips

Whole life insurance is permanent insurance that guarantees a death benefit, remains in force for the “whole” life of the policy owner and builds cash value. The insurance company invests the premium, whether it is paid in installments or as a single one-time payment. The returns grow tax-deferred as long as the policy remains in force. A guaranteed whole life insurance policy can be used both as a way to protect a family from financial hardship and as a way to build additional retirement savings while helping with estate planning.

Guaranteed whole life premiums paid by the policy owner are usually higher than the premiums paid for other types of insurance, especially term insurance. However, a whole life policy that is in effect for much of the adult life of the policy owner can be far more cost effective than other permanent or term policies.

» Get Whole Life Insurance Quotes Now

Choosing the Policy

There are six main whole life policies from which a policy owner can choose:

Participating Whole Life Policy

A participating whole life policy is one that “participates” in the earnings of the insurance company. The policy owner is able to choose among taking the dividend as cash, adding the dividend to the cash account or using it to pay the premium.

Guaranteed whole life tip: Earnings on all whole life policies grow tax-deferred, as long as the policy remains in force. This kind of policy is a great way for most people to accumulate additional money for retirement. Savings can accumulate more quickly as more money is able to compound over the years.

Non-Participating Whole Life Policy

No dividend is paid to the policy owner on a non-participating whole life policy. The costs for the policy remain fixed for the life of the policy owner. As one would expect, premiums are lower than for those on a participating policy.

Level Premium Whole Life Policy

Premiums are paid in installments throughout the duration of the contract and remain level.

Limited Payment Whole Life Policy

The policy owner pays premiums for a limited number of years.

Single Premium Whole Life Policy

A single premium is used to buy the policy. The single premium policy is used primarily as an investment strategy and as an estate-planning tool. A single premium guaranteed whole life policy might also be purchased instead of an immediate annuity. One of the primary benefits of a single premium whole life policy is that 100% of the equity is immediate. The policy owner can borrow against the policy or use it as collateral for a loan right away.

Intermediate Whole Life Policy

The premiums paid on an intermediate whole life policy are flexible and can be adjusted based on the needs of the policy owner.

Choosing A Policy with Level Premiums

Most whole life insurance policies offer the benefit of level premiums. Premiums remain the same each year and do not increase as the insured gets older each year.

What changes over time are the dollar amount of the premium that is credited toward the insurance coverage portion of the contract and the amount that is credited toward the investment account. As he or she ages, the amount that is applied toward insurance coverage increases because the likelihood of paying a claim increases.

Borrowing Against a Whole Life Insurance Policy

Among other important guaranteed whole life tips is knowing when and how to borrow against the policy. Provided the account has sufficient funds, it can be borrowed against or used as collateral for a secured loan. Each life insurance company will have different restrictions and requirements, but the ability to use the funds can be very helpful. A policy owner can also use the accrued cash to pay premiums should he or she need to.

A policy owner can also surrender the policy for the cash value. The number of years the policy has been in force will determine the amount he or she is entitled to. He or she might not be able to surrender the policy for the entire cash amount, especially during the early years.

Retirement Savings and Estate Taxes

All interest and earnings credited to a whole life insurance policy are tax-deferred. The policyholder does not pay tax until the policy is surrendered or the death benefit is paid. For this reason, some people choose to purchase a whole life insurance policy as a complement to an established retirement plan.

Anyone interested in whole life insurance is urged to seek the advice of an investment and insurance advisor prior to purchasing a policy for estate planning purposes. As a general rule, if the contract is set up correctly, a whole life policy can provide shelter from excessive estate taxes.

The accumulated cash in a whole life policy is not usually taxable under current federal tax statutes. The dividends paid to the policy owner are considered a “return of premium” and are also usually not taxable, provided they are not in an amount higher than the premiums that have been paid.

The death benefit of a guaranteed whole life policy provides the beneficiary with cash that is not taxable. But if the policyholder owns at least a portion of the policy when he or she dies, the death benefit could be considered part of the estate. This will more than likely trigger federal and state inheritance taxes.

To find the best life insurance products request a free, comprehensive quote comparision. Secure your future today, Get Started Now.