Cash Value Life Insurance
Cash value life insurance is a form of permanent life insurance that features a cash value savings component. This is also called as whole life insurance.
When you own cash value life insurance, your premium payments are allocated three ways. First, a portion of each premium pays for the actual insurance costs. Like term insurance, a specific cost is associated with the policy’s death benefit, based on your age, health, and other underwriting criteria. Second, a portion pays for the insurance company’s operating costs and profits. The remainder goes toward the policy’s cash value.
A permanent life insurance/Cash value life policy covers you for life as long as you make your premium payments. The most traditional form of permanent life insurance is whole life. Once you are approved for the policy, the insurance company cannot cancel the policy, and the cost of your payments will not go up, because it “averages” insurance costs over your lifetime.
Top 5 High Cash Value Life Insurance Benefits
- Cash value whole life insurance offers a contractual rate of return as well as likely dividends and additional growth that is not dependent upon the financial markets. No risk of stock market crash. Traditional whole life insurance offers a contractually Guaranteed rate of return based upon the cash value deposited. Whole life policies also offer non-guaranteed “up side” that essentially improves upon the guaranteed portion through the payment of dividends.
- Cash value life insurance lasts for life as long as you pay premiums or till premium paying term ends and it may get less expensive as you get older and the policy matures.
- Cash value life insurance accumulates cash value and they are completely tax-free. They also offer total flexibility for cash withdrawals and policy loans after 3 years.
- Cash value life insurance is an extremely safe investment that can be utilized as needed to fund higher risk/return investment.
- Cash value life insurance can be strategically used to maximize the cash value and tax savings while recapturing debts for financing other necessary items such as vehicles or business expenditures.
Term Policies Don’t Pay Out
In fact, the insurance companies know that most term life policies never pay a death benefit because the policy expires before the person dies. It is believed that 98-99% of term life insurance policies expire without paying out. This is just like buying a lottery ticket. This is why most private insurance companies in India sell term life aggressively as they can make huge profit in selling such plans in which 98 to 99% expire worthless.
Essentially, the insurance company spent little to provide the death benefit. On the other hand, whole life policies ALWAYS pay a death benefit if kept in force and therefore they are more expensive at first. The historic returns of the stock market have not been shown to outpace the steady 4% guaranteed return of a whole life policy, further benefited from potential dividend payments ranging from 2-3.5% and up depending on the interest rate environment. That is a total potential return of 7% annually income tax free!
So, a front end loaded whole life policy with a permanent growing death benefit is inherently wise and effective for providing peace of mind and loved ones with needed resources.
The best life insurance coverage is somewhat subjective but we define it as a policy that builds wealth and creates a legacy. It should include high cash value, built in protections against loss, tax advantage system.
Three ways to benefit from Cash Value Insurance:
• An income tax-free death benefit to your heirs. You can pass on a greater legacy to your beneficiaries because they will not pay income taxes on the death benefit they receive.
• Tax-advantaged growth of your assets. Incorporating cash value life insurance as a component of your retirement plan gives you the opportunity to grow your assets tax-deferred and helps
achieve your long-term financial goals.
• A source of tax-free income for retirement — or for other goals — through withdrawals or loans.
Ask an experienced financial planner for guidance in determining how to manage your funds – and for exploring your options to generate reliable income. They can help you build a rock-solid strategy that lets you enjoy a predictable lifestyle for the long haul.
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