Whole life insurance is a type of permanent life insurance. It offers lifelong coverage and several guarantees, which appeal to many. Beneficiaries can claim the death benefit after the policyholder’s passing if the premiums are paid on time and all the plan’s guidelines are followed. One can also receive dividends and access unique features like cash value accumulation. That’s why people shopping for life insurance should consider a whole life insurance policy.

Lesser-known features of whole life insurance
Whole life insurance plans have been around for a while, so many are familiar with their benefits. For example, people know they offer coverage for the rest of their lives and that their loved ones will receive a guaranteed death benefit when it is time. But that’s not everything. Whole life insurance also has other features that still need to be explored. For instance, some do not know they can tap into it even while alive. And being unaware, they tend to overlook whole life insurance, losing out on a great investment opportunity.

Dependable death benefit that can be used for anything
If someone is the sole breadwinner, it is understandable for them to put their loved ones’ financial well-being first. Whole life insurance can help people materialize this goal. It gives the beneficiaries, whether the spouse, an aging parent, a child, or someone else, a potential tax-free death benefit.

Loved ones can use the death benefit for anything. For instance, they can use it to meet everyday expenses, repay loans or mortgages, pay for the funeral, and fulfill any other need they may have going forward. Unlike term insurance, whole life insurance covers one’s entire life, regardless of how many years the policyholder lives. Of course, the guarantee remains active as long as the individual pays the premium amount.

Reliable locked-in rates
The premium amount remains the same in whole life insurance plans. If one’s health worsens, they will never see the premium surge. Also, individuals are never denied coverage, even in their later years. On the contrary, term insurance expires after a certain period, and applicants may have to pay a higher premium based on age. One may also have to undergo medical underwriting to get more protection.

Investment-like cash value to build wealth
When a person pays premiums for whole life insurance, a part of it goes into the cash value, which grows throughout their lifetime. The longer one pays the premium, the more the cash value will be. This amount also earns interest at the prevailing rate. Another exciting thing is that the cash value earnings or interest accumulate tax-deferred or tax-free, regardless of a market plunge or change in interest rates! This is one of the main reasons why people consider whole life insurance a great investment opportunity.

Access to the cash value
Once people build cash value, they can access this amount for several financial needs. While every contract will have its own rules, one may use the balance to:

– Make a withdrawal
It is a good alternative if one needs extra cash to reduce debt or deal with a large expense.

– Take out a loan
When someone takes a life insurance loan, they borrow money and pay interest. The interest circles back to the cash value, and a small chunk goes to the insurer.

– Surrender the life insurance
While individuals can surrender the contract and receive a lump-sum payout, their coverage will no longer be intact. Some insurance companies will also levy charges if someone surrenders within the initial few years.

– Pay premiums
The cash balance can be used to pay the life insurance premium. It works as a cushion to keep the insurance contract active if one experiences a budget strain or loses one’s job.

One should note that any cash taken off the life insurance (e.g., a loan not repaired) will reduce the death benefit and coverage balance. Ultimately, one may have a small balance remaining for their loved ones.

Potential to earn dividends
Participating whole life insurance plans provide dividends. Those who invest in participating plans become stakeholders in the insurance company, which distributes dividends to eligible individuals based on its performance.

One may receive the dividends as cash value, lowered premiums, or another method. Individuals can use the amount to reduce loan payments borrowed against the contract, buy additional insurance, or do anything else. But since every contract or insurer does not offer dividends, one should read the terms and conditions before signing on the dotted line.

Customizable with several riders
Individuals can personalize the whole insurance contract based on their budget and the required coverage amount. In addition to selecting the death benefit amount, one may be able to pick a customizable payment plan and spread the premium over their lifetime. Alternatively, one can consider paying a higher sum over a short duration. After paying the complete premium amount, policyholders no longer have to make any payment to build cash value or keep coverage. In addition, they can purchase optional add-on riders or features to suit their coverage needs.

Although whole life insurance provides several benefits, such as a guaranteed death benefit, it is more expensive than term life insurance. Before signing up, one must research the plan thoroughly and consult an expert.