"Elementary, my dear Watson." —The Return of Sherlock Holmes (1929)
whole life coverage. No mystery here.
You don’t need Sherlock Holmes to deduce that fact that “whole” life insurance covers you for your entire life. You might need him to figure out who first popularized the quotation above—it doesn't appear anywhere in anything Sir Arthur Conan Doyle ever wrote.
Here's what whole life insurance offers:
If you want permanent coverage for the rest of your life, a whole life policy is the simplest way to make that happen. It’s solid and steady, the rock of life insurance. Trusted Quote can find you the most affordable policy from the top-rated carrier. You'll have the best available rates at your fingertips in seconds. Plus, you can reach out for help by phone (800-823-4852) or live chat if you need it.
We've helped more than half a million families get coverage over the past 40 years...are you next?
Let's start with a basic definition:
|Whole life insurance pays an agreed-upon amount of money to a person’s beneficiaries when he or she passes away. The policy also contains a cash value account that can be used for investment purposes.|
This type of policy provides specific benefits that include:
The best part about this type of policy is that it works for a wide range of individuals and families.
As Hamlet and numerous Memphis-style barbecue champions have said, “Ay, there’s the rub.”
You’ll pay more than you would for a term policy, there’s no question about that. Your rates will depend on your age, sex, health, state of residence, and amount of coverage you want.
But the upside is that your payments will never go up—never. Not if you take up smoking, not if you have a stroke, not if you lose a foot in a tragic lawnmower accident like that guy in Season 3 of Mad Men. No matter what happens later in life, your monthly payment and your death benefit are 100% guaranteed.
Disney used his policy's cash value to help build Disneyland.
Cash value is a feature that turns your life insurance policy into a sort of investment vehicle. As you make your monthly payments, a small portion of that money is set aside in a cash value account that grows tax-deferred at a set interest rate as long as your policy remains in force.
Your cash value accumulates over time, like an enforced savings plan. As an example, Insure.com posted a scenario that shows you how fast your cash value might be able to pay for the entire policy. If a 35-year-old non-smoker in good health bought a $100,000 whole life insurance policy from New York Life, the cash value account attached to his policy would be able to pay his premiums beginning in the 17th year of his policy. If he bought this policy at age 35, he’s home free at age 52. Not too shabby.
You can also withdraw some or all of the cash value and use it for virtually anything you want. In most cases, your withdrawal will be tax-free up to the amount you’ve paid in monthly payments. (Be sure you ask your agent whether any withdrawals reduce your death benefit—each policy will be slightly different.)
Another interesting feature of a cash value account is the ability to take a loan out against it. You can do this at a much lower interest rate than a bank loan or credit card loan. If you can’t pay it back (or don’t want to), the amount you borrowed will be deducted from the death benefit your beneficiary receives when you die. You can't get this kind of financial flexibility from a regular bank loan or line of credit.
If flexibility combined with lifelong protection sounds good, click here for an instant quote!
No pressure, but Walt Disney borrowed against the cash value of his life insurance account to help fund the construction of Disneyland. And, well, sales at Disney Parks and Resorts totaled $3.1 billion in the 2011 fiscal year.
So don’t be a slacker and buy a collection of vintage Ed Hardy trucker hats. You can send kids to college, pay off a mortgage, start a small business or expand the small business you already have.
No. Most whole life policies only pass on the death benefit to your designated beneficiary. The cash value portion of your policy is a “use it or lose it” feature. If you want your family to receive cash value plus the death benefit, get a universal life insurance policy. Some policies may allow you to pass on the cash value to your beneficiaries, but you can expect to pay for more the privilege.
It depends on what you’re after. If affordable coverage is your only concern, term life might be better for you.
If you’re thinking you could buy the cheaper policy, invest the difference between a term policy and a whole policy and come out ahead, you should think hard about how much of a return you’re likely to get on the invested savings.
Here’s what we mean: the cash value portion of a whole life insurance policy is going to increase by a defined percentage as you keep making monthly payments. Unless you know you can beat that percentage, you’re better off with the cash value than a do-it-yourself investment portfolio.
One example, calculated by James Hunt of the Consumer Federation of America, showed that you’d need to beat a 4.5% increase for your personal investment to equal what you’d gain with a cash value account after 20 years. Of course, the exact rates of interest are going to vary by policy, so this isn’t an ironclad guarantee. However, if you think about the average return you’ll get on a money market account or CD, it’s probably not going to be over 3%.
Just for comparison’s sake, in November of 2012, we searched for the best available rates on a 5-year jumbo CD returned a max of 1.85%. That is not even in the same ballpark as 4.5%. Heck, it’s not even in the same zip code.
There are three main ways your whole life insurance policy helps you save on taxes:
Why, yes there are. Most of them have to do with sizing your monthly payment. Here are just a few:
You can talk to us about any of these options and get a quote customized for your family's needs. Call us at 800-823-4852!
Orlando Sentinel: Disney Sees Record Profit Amid Gains at Theme Parks, TV Channels
Insure.com: Cash Value
What does Sir Arthur Conan Doyle have to do with life insurance?
As a young doctor struggling to make ends meet, Conan Doyle also wrote ad copy for a life insurance company. When the compilers of Arthur Conan Doyle: A Life in Letterswere going through Conan Doyle’s letters, they found the only known example of his ad work—the Gresham Life Assurance Company ad. (In England, “insurance” is called “assurance,” just like “cookies” are “biscuits,” “trucks” are “lorries,” and “gas” is “petrol.” We have no idea what "bangers and mash" are. Sounds dodgy to us.)
This website provides information about insurance products. This information is not intended to help you avoid paying taxes or IRS penalties. Always consult your tax advisor for specific tax-related questions and problems.