Whole life insurance is a permanent type of life insurance that stays with you until you pass away or stop paying for the policy. As long as you continue to make the premium payments, the policy will stay in effect, and it will pay out a death benefit when you die.
In addition to the death benefit works and of the whole life insurance policy, these policies also come with a cash value component. Part of the money that you pay to the insurance company every month or year goes into an investment account. This money is then invested by the insurance company and returns are added to the policy holder’s accounts. Over time, this creates a cash value that grows with your policy.
Once you have accumulated some cash value, you could choose to utilize it in a few different ways. You could cash out the policy and take the cash value. Another option is to borrow against the cash value. With this option, you have money that you can use for any purpose and then pay back to the insurance company later.
Planning for Retirement
Some people use whole life insurance products as a for retirement planning. The nice thing about using life insurance is that you can borrow against the policies without having to pay taxes on the money that you receive. Since the money that you get is technically a loan, this is not considered income. Then you can make a nominal payment back to the insurance company for years until the loan is paid back. Depending on your tax status and how much money you have in your retirement accounts already, this can be a good way to save for the future if you’ve already reached your retirement account limits.
Whole life insurance policies tend to be more expensive than term life insurance policies for the same death benefit. You can get some free whole life insurance quotes here and compare the rates. However, they are permanent, which means your family is going to get a death benefit at some point no matter what happens. At the same time, the policy also grows a cash value for you without you needing to do anything.