About 54 percent of Americans have some form of a life insurance policy. Life insurance can be a difficult subject as people don’t feel comfortable talking about and planning for the end of life. While most people agree there is value in life insurance, it can be difficult to decide which type is best.

Wondering about whole life insurance? This type of policy can provide lifelong coverage and combines an investment account with an insurance product. If you pay your premiums, your beneficiaries can claim the policy’s death benefit after you pass away. Keep reading to learn more about whole life insurance.

  1. You Can Earn Dividends

You can collect more dividends the longer you keep your whole life insurance policy. This is because it takes time for the cash value to kick in, but you will realize value with each year.

The cash value of your policy gives you a living benefit. Each year, your policy’s cash value increases with interest earned and dividends. They will grow as you pay more premiums into your policy, so in essence, it gives you a source of equity.

You can use your whole life dividends to:

  • Get cash
  • Leave alone to accumulate more interest
  • Purchase additional insurance

Make sure you talk to your insurance agent about the pros and cons of your options before making any decisions. You want to make sure you understand the full impact on your policy.

  1. You Won’t Outlive a Whole Life Insurance Policy

A major selling point over term life insurance is that a whole life insurance policy will be in force when you pass away. You can’t outlive your policy as long as you have paid your premiums.

However, some policies only pay out the death benefit and not the cash value accumulated. This is why you should get multiple life insurance quotes to ensure you get the cash value in addition to the death benefit. 

If you have any past withdrawals or loans, your payout will be reduced. 

Ask life insurance companies if you can purchase a rider to give your beneficiaries both accumulated cash value and the death benefit. You will pay higher premiums, but your beneficiaries will get a larger payout.

  1. You Can Use Cash Value

We have mentioned cashing into the cash value, so let’s take a closer look. If you need a loan, you can take a tax-free loan and pay it back without any interest. 

If you take out a withdrawal, there are no taxes if your withdrawal is less than your cash value from the premiums paid. If your withdrawal is larger, you will need to pay taxes on the difference.

If your loans or withdrawals are not paid, it will reduce the death benefit. However, this may not be bad because this is the main reason people get a whole life insurance policy to get the cash value instead of it sitting there unused.

Make sure you discuss any ramifications of using your cash value with your insurance agent before making any decisions. Learn more about cash flow here https://paradigmlife.net/blog/cash-flow-banking/.

Ready to Learn More?

As you can see, there are benefits to whole life insurance. You can use it as an investment as well as a death benefit. There is a lot to learn about life insurance policies, so it’s important to do your research so you fully understand the available options.

Check out some other great articles on finance and health today by perusing our site.