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Whole Life Insurance
Whole life insurance provides protection for a lifetime as long as your life insurance premiums are paid. It offers guarantees that you can’t find in other forms of life insurance, including guaranteed premiums that will not increase, a guaranteed death benefit and guaranteed cash value growth. A thorough understanding of your family's current and future life insurance and financial needs is key when determining how much and what type of whole life insurance is appropriate. A sufficient amount of coverage is essential to ensure your family's financial future is not left to chance. Once you've determined the appropriate amount, you next need to decide what type of life insurance is right for you.
HOW DOES WHOLE LIFE INSURANCE WORK?
With whole life, one of the most common types of permanent insurance, your premiums remain fixed over the premium payment period of the policy and must be paid regularly in the amount indicated in the policy.
Whole life policies sold through mutual life insurance companies are generally “participating” policies, meaning that policy owners are entitled to share in any annual distributions of the insurance company’s surplus. Your share is known as your dividend. While dividends are often paid annually, they are not guaranteed. You may take your dividends in cash, or use them to reduce premiums or purchase additional insurance.
You can cancel or surrender the policy, in part or total, and receive the net cash value as a lump sum. Keep in mind the decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not suitable as a vehicle for short-term savings or short-term investment strategies. While the policy allows for access to the cash value in the short term, such as through loans, these transactions will impact the policy’s death benefit if the values are not restored prior to the insured’s death.
You can borrow your policy’s cash value, up to a pre-determined limit1. Policy loans can be taken for any purpose.
If you no longer want to pay policy premiums during your premium-paying period, your policy can be maintained on a paid-up status with a reduced face amount. No further premiums will be required, and your policy will continue to be eligible to receive annual dividends.
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Different kinds of Whole Life Permanent Insurance
Whole Life Insurance products can have many different features and riders as well as different types of policies. Most Whole Life Insurance policies are payable until age 100, here is some basic information about Whole Life Insurance:
Standard Whole Life Paid up at age 100 Life Insurance requires a premium payment to age 100, making it the lowest premium whole life insurance policy of all the products. Paid up at age 100 whole life insurance is a good choice for family income protection. This kind of life insurance policy may sometimes be increased (subject to underwriting) or decreased as your needs change.
Paid up at age 65 Life Insurance is ideal for both personal and business life insurance planning because it is guaranteed to be fully paid for at age 65, a typical retirement age. Individuals might use the cash value of this type of whole life insurance policy to supplement their retirement income.A In a business market it might be used to protect against financial loss due to the death of an owner or key employee, or it can fund an employee benefits package. Like the standard policy, a paid up at 65 life insurance policy may be increased (subject to underwriting) or decreased as your needs change.
10 Pay Whole Life Insurance is guaranteed to be fully paid for after 10 annual premiums. 10 pay whole life insurance is an excellent choice when you need a guaranteed limited premium payment period for your life insurance. In personal planning scenarios, 10 pay life insurance is ideal for supplementing retirement income because you can take advantage of the guaranteed limited premium payment period while your income is high. It can also be useful for providing a gift to a favorite charity. In the business market it is a good choice for funding a non-qualified, selective deferred compensation plan or providing an employer with "Golden Handcuffs" to help retain top talent.
High Early Cash Value Life Insurance is designed specifically as a "balance sheet" product to provide asset protection for the business market. It positions the cash value in the policy as an asset that can be carried on the business balance sheet. Generally a HECV life insurance policy's cash value will be nearly equal to the base policy standard premiums paid at the end of the first policy year. It is usually paid for by age 85. Like other types of whole life insurance a HECV life insurance policy may be increased (subject to underwriting) or decreased as your needs change.
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Some of the above products are available for 412 (i) Retirement Planning1
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WHOLE LIFE |
HIGH EARLY CASH VALUE (HECV) HECV |
LIFE PAID UP AT AGE 65 |
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Level premium whole life insurance that provides a guaranteed level face amount |
Level premium whole life insurance providing a lifetime, level, guaranteed face amount |
Level premium whole life insurance providing a level, guaranteed face amount |
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Premiums are payable to age 100 |
Premiums are payable to age 85 |
Premiums are payable to age 65 |
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Provides for cash accumulation and payment of dividends 2 |
Provides cash accumulation and payment of dividends 2 |
Provides cash accumulation and payment of dividends 2 |
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Waiver of Premium Rider 3 (WP) provides premium payment protection in the event that the participant becomes totally disabled as described in the rider |
Waiver of Premium Rider 3 (WP) provides premium payment protection in the event that the participant becomes totally disabled as described in the rider |
Waiver of Premium Rider 3 (WP) provides premium payment protection in the event that the participant becomes totally disabled as described in the rider |
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Offers guaranteed cash value of 90% of premiums paid into the policy at the end of the first year 4 Cash - value increases during years 2-5 equal to premiums paid Cash value at the end of five years equal to at least 98 percent of premiums paid |
Policy is paid up by the age of 65 without additional premium payments |
A Distributions under your policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy(your cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty. Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
1 A 412(i) plan must be funded exclusively with individual insurance products, either fixed annuities or a combination of fixed annuities and life insurance. 2 Dividends are not guaranteed. 3 Waiver of Premium rider may be available at an additional cost. 4 Excluding annual $50 policy fee, any classified premium and costs for optional coverages.
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