Life, Disability & Long Term Care Insurance Services

Uncovering the Mysteries of Whole Life Insurance



: : Roland A. Vitanza, J.D.
Specialist in Life, Disability and Long Term Care Insurance
631.923.1595 ext. 342  
G.R. Reid Consulting Services, LLC
                               
This article will focus on several factors which make Whole Life Insurance a dynamic asset to any family protection plan.  In the last discussion of Whole Life Insurance we glossed over the main benefits of A whole life insurance policy; now I will discuss the strengths of Whole Life Insurance that are not so obvious to the everyday American.

The growth of cash value inside of the life insurance policy is deferred from taxation while the funds remain in the policy, making whole life insurance a wealth protecting instrument.  During the insured’s life, cash values can be accessed under advantageous tax rules.  This means that dividend withdrawals are tax-free up to the amount cumulatively pain in premiums.  If a policy owner takes a loan against the life insurance policy, this will not create a taxable event, even if the policy may have a substantial gain in excess of paid premiums.  A policy owner may have the policy pay for itself by using dividends received to pay the premiums.  This is a tactic that can be used at any time by the policy owner and the policy owner can also choose to stop this option and continue making premiums payments themselves.  If a policy loan has been taken, the annual dividend can be used to pay back a policy loan.  By taking a loan from the policy, the policy owner is avoiding the use of loan applications and having to deal with lenders and interest payments.  That being said, a whole life policy may also be used as collateral to receive a loan with a favorable interest rate.  This increases the value of whole life insurance exponentially.

Whole life insurance loans are paid back on a flexible schedule decided by the policy owner.  If a policy owner wishes to pay back to the loan, then he may do so, and the death benefit will rise accordingly.  Furthermore the policy owner will be able to continue to borrow from the policy at any time and if dividends received are allowed to accumulate within the policy the policy death benefit will grow helping to resist the eroding effects of inflation.