Once you learn how to buy whole life insurance, and truly understand how it works, you can use the cash value to finance everything you buy. This requires discipline though and should only be used with the aid of an experienced agent.
All life insurance policies pay a claim when you die, but whole life can provide many economic benefits while you're alive. If the policy is set-up correctly when you initially make the purchase, you can use it much like any other financial account as a place for your money to reside. The important step is to buy cash value, dividend paying whole-life insurance from a mutual company.
There are but a few mutual companies left today. Most of the life insurance companies have demutualized and become stock based companies. This means their obligation is to their stockholders. Mutual companies have an obligation to their policyholders. To name a few, MassMutual, Guardian, Northwestern Mutual and New York Life. There are more, but those are the major players that have been around for a while.
Before we get started on how to buy whole life insurance, let's take a look at how the policy works. With a Whole Life Insurance Policy the premiums remain fixed for the life of the policy. A portion of the premium is used to purchase and accumulate a guaranteed cash value thus adding a savings element. You can purchase paid up additional insurance as well to increase this cash value. Dividends, which are not guaranteed, may also increase policy cash value. Provided that premiums are paid as specified in the policy, the policy remains in force during the insured's entire lifetime.
The part of your premium that goes into a cash reserve and accumulates as cash value is tax-deferred and can be tax-free if accessed correctly. Generally you can access this cash value at any time, for any reason (Imagine doing that at your bank without a lengthy application and credit report). The reasons could be many including financing a car, a hardship, college, marriage, retirement or critical illness.
While providing many benefits of its own, whole life insurance also makes your other assets stronger. By providing protection, a hedge against inflation and significant tax benefits. With permanent life insurance in place at retirement the owner of the policy can spend down all of his assets if needed without fear of running out of money.
Some of the many benefits of owning whole life insurance:
- Tax Deferred
- Tax Free *
- Estate Tax Free *
- Unlimited Contributions *
- Competitive Return On Investment
- Creditor Protection *
- Unlimited Investment Options
- Liquid, Use and Control
- Disability Waiver *
*Benefits may vary based on your situation. All benefits should be examined by an experienced agent and may not work in all cases.
Before you purchase whole life insurance, follow these steps:
- Interview and find an agent that represents a mutual life insurance company. Ask the agents how much life insurance they own, and how much is whole life (Pay close attention to see if they mention "human life value" or "economic value".
- Once you find an agent and decide on a mutual company, decide how much life insurance you want. You will find this is different than what you may have been told to buy, or how much you need.
- You may want to own some term insurance to help you achieve your human life value. If the term is from a mutual company, it is usually convertible to whole life at a later time.
- After you decide how much you want you can then determine how to fund the policy. Your agent should help you here, that's what he gets paid to do. Factors will include how long you want to fund the policy and how you foresee yourself using the policy in the future.
- A few important riders you should look for include the waiver of premium, and paid-up-additions rider. The waiver will protect you in the event of your disability and the PUA will allow you to overfund the policy as you want to help grow your cash value.
Follow these steps and buy whole life insurance while you are young and healthy. If you have health issues, then you can buy it on your spouse, children or loved ones and you can retain ownership. Whole life insurance can provide many benefits while you are alive and allow you to pass on a legacy of financial independence to your heirs.
Enjoy Life Today, Leave a Legacy for Tomorrow sm,
Barry Page is an experienced life insurance agent. He can be reached at: http://www.legacyinsuranceagency.com/