Whole Life Insurance is the most common type of permanent life insurance because it offers stable premiums and fixed interest rates. Yet, Whole Life Insurance isn’t ideal for everyone. You might be wondering: is Whole Life Insurance worth it?
And if you are, this is a good thing because it shows that you care about your family’s future and that you are currently comparing your options.
If this is the case, you are at the right place! We created this short and succinct guide to help you through this process, and answer some of your most burning questions about Whole Life Insurance.
But first…
Is Life Insurance An Asset?
An asset is anything that multiplies your earnings or makes you more money. Whole Life Insurance is an asset because of its accumulating cash value feature. However, Whole Life Insurance isn’t a fast-growing investment vehicle. Compound interest can take years to build any sizable profits.
The average rate for Whole Life Insurance borders 3% which, when compared to other life insurance policies, is not much to work with. Your growth will take even longer if you start your policy at a later age because more of your premiums will go toward insurance fees, leaving very little for investment.
Want to learn the best way to use Whole Life Insurance to build your wealth? Book a free consultation with me now to get all the details on how you can make more money with your Whole Life policy.
Is Whole Life Insurance a Good Investment?
In order to answer this key question, let us review some of the advantages of Whole Life Insurance policies in general, and see why so many people in the United States (and around the world) opt for this type of life insurance policy.
Whole Life Insurance offers Life-Long Coverage
Anyone with a permanent life insurance policy will benefit from life-long coverage. Unlike term life insurance which matures within 5 to 40 years based on your policy, Whole Life Insurance rarely expires. It’s designed to last your whole life to ensure your beneficiaries receive a payout.
Whole Life Insurance Provides Family Protection
When debating whether or not Whole Life Insurance is a good investment, think about it long-term. When you die, your Whole Life Insurance provider will release the death benefits to your family or designated beneficiary.
The payout from a Whole Life Insurance policy can go a long way to providing for your loved ones, particularly if you were the sole breadwinner of your household. Most people will use the first portion of their inheritance to cover funeral expenses like casket purchase, gravesite preparation, hearse transportation, and cremation (if applicable).
The remainder of the death benefits from your Whole Life Insurance policy can go towards any personal needs your family may have such as outstanding medical bills, debt, or tuition fees. If you have a stay-at-home spouse, they may use the funds to purchase basic necessities for the home while searching for another source of income.
In some cases, your Whole Life Insurance policy might be tied to shares in a family-owned business. Your spouse could use the policy’s death benefit to buy out the shares owned by your family and preserve your financial legacy for your children.
Whole Life Insurance comes with Guaranteed Premium and Death Benefits
Once you begin a Whole Life Insurance policy, your service provider will lock in your rate for the entire duration of your plan. The younger you apply for Whole Life Insurance, the lower your rates. Therefore, if you sign up while you’re still in your youth (say, up to your mid-30s), you can lock in a low rate indefinitely!
Many parents take advantage of this feature and begin paying for Whole Life Insurance policies for their children. That way, they receive some of the lowest Whole Life Insurance rates possible, and won’t have to worry about increasing premiums later in life.
Since the insurance premium is fixed, your death benefits won’t decrease over time. Plus your family is guaranteed a cash amount at the end of your policy if you keep up with your premiums.
Whole Life Insurance Offers Fixed Cash Value Interest Rates
The cash value interest rates for Whole Life Insurance policies are also fixed for the duration of your plan. This can be advantageous when compared to other permanent life insurance policies like Index Universal Life, which depend on stock market performance to deduce your profits.
Whole Life Insurance accumulates cash value by compounding interest on your previous savings. Therefore, you’re able to grow your account at the same rate year after year regardless of external market fluctuations.
So, is Whole Life Insurance worth it? In this case, if you’re into investing, consider it a more stable investment option, especially if you are risk-averse!
Whole Life Insurance accrues Annual Dividends
Whole Life Insurance policyholders receive annual dividends from their insurance policy providers. A dividend is a reimbursed portion of your paid premiums. You can use those returned funds to payoff premiums for the following months, or you could invest them into your cash value account to increase your earnings.
Tax Deferrals
Unlike retirement savings programs like Social Security and 401(k), the funds from your Whole Life Insurance policy are non-tax-deductible.
What does this mean? Simply put, the money you invest and earn from your cash savings account won’t be taxed—neither will the death benefits your family receives. They’ll be able to enjoy the full dollar value of your life insurance payout without incurring additional fees.
Living Benefits and Loan Collateral with Whole Life Insurance
Once your cash value account grows to a substantial amount, the funds will be at your disposal. That means you’ll be able to use the money you earned from your investment right away. We call these living benefits because they’re available to you while you’re still alive.
Some Whole Life Insurance policyholders use their investment profits as a supplemental retirement income. However, you’re free to use it for emergency expenses or vacations! (No one is looking). You can also use it as collateral for personal or business loans.
There are no limits to how you can spend it! With that being said, is life insurance an asset? Yes, if you want to take advantage of it while you still live!
Ready to earn more money with a Whole Life Insurance policy? Book a free consultation with me now to find the best Whole Life Insurance plan for you!
Whole Life Insurance also provides Disability Protection
Whole Life Insurance providers offer a range of customizable riders (add-ons) that can enhance your policy. For example, if you purchase a Waiver of Premium rider with your plan, your insurance provider will preserve your policy even if you are unable to pay premiums due to a sudden disability.
Furthermore, you’ll continue to receive annual dividends and accumulate compound interest and cash value on your account. And most importantly, your family will still be guaranteed death benefit protection despite your injury.
Protection Against Creditors
If you die with outstanding financial debt, your creditors can’t force your family to use life insurance proceeds to pay the money you owe.
In fact, creditors are also prohibited from contacting your family or applying pressure on them to resolve your debt with the inherited funds. Most states began enforcing this regulation to prevent Whole Life Insurance beneficiaries from additional financial losses.
With all the perks of Whole Life Insurance that we have highlighted, you probably already have your own answers to the question: “Is Whole Life Insurance worth it?” But before we completely answer this question, it is important to highlight the potential downsides of using Whole Life Insurance.
Disadvantages of Whole Life Insurance
Whole Life Insurance has Expensive Premiums
Since Whole Life Insurance policies are permanent, their premiums are usually much higher than Term Life Insurance policies. This makes sense because you are paying for lifelong coverage. Annual premiums for Whole Life Insurance range from $4000 to $28,000 or more for a $500,00 policy.
With Whole Life Insurance, There is Limited Payment Flexibility
Whether fixed payments are a pro or a con all depends on your perspective. Because Universal Life Insurance policies are flexible, you can lower your premiums in seasons where you’re financially pressed (and we all know how unpredictable life can be).
Some people feel more comfortable knowing they can adjust their payments to make ends meet. Universal Life Insurance tends to be less expensive than Whole Life Insurance, and the freedom of flexible payments can be well worth the investment.
Is Whole Life Insurance A Good Investment?
I think we’ve said it all, but these are our final words.
Is Whole Life Insurance a Good Investment?
Well… a growing cash value account can be an attractive incentive to get a Whole Life Insurance policy. However, it should not be the only motive to apply for life insurance coverage.
Whole Life Insurance is worth it if you hope to create financial protection and income for your family after you die. Besides having lifelong coverage, you’ll also enjoy living benefits and tax-deferred cash withdrawals while you own your insurance policy.
Overall, Whole Life Insurance can be useful to supplement retirement savings. Its life-long duration justifies the high premiums behind the policy, but the cash value returns are still relatively low to rely on as your sole source of investment.
Still, wondering if Whole Life Insurance is an asset you should consider? I want to answer your remaining burning questions! Book a free consultation with me, and I will guide you on how to pick the best Whole Life Insurance policy for you!