Whole life insurance pros and cons: can they help you make right decision? Absolutely. When you have a list of benefits and drawbacks, you can tally them up and see which makes more sense for your family, needs, and budget. So without further ado, let’s get started. Here's what we'll go over:
Whole life insurance covers you for your entire life, no matter how long that may be. When you die, your insurer will pay the death benefit to your beneficiaries (income-tax-free, in almost all cases).
Like all permanent policies, whole life also contains a cash value account. Attached to your policy, the cash value functions like a savings account. A small portion of every payment you make gets put into this account. There, it grows over time with a guaranteed interest rate set at the time you buy your policy. Whole life policies are designed so that the cash value is intended to equal the amount of the death benefit by the time you reach age 100.
It can take a few years for your cash value to really start growing. That’s why some insurers only make it available to you after 2-5 years. The longer you’ve owned your policy, the more time your cash value has had to grow. If you buy a policy in your 20s or 30s, for example, and let it grow for another 30 years, it can provide a substantial source of supplementary retirement income later in life.
You can access that cash without paying any income tax, up to the total amount you’ve paid into the policy. If you withdraw more money than your cash value contains, it will reduce the death benefit that goes to your loved ones when you pass away.
There are a lot of whole life insurance pros and cons, but let’s start with the good stuff.
As with any financial decision, you have to look at the big picture to know if it’s right for you. In terms of whole life insurance pros and cons, here are the potential drawbacks you need to consider.
If you want coverage you can’t outlive, whole life is a great choice. It comes with important guarantees, including your locked-in payment amount and death benefit amount. Those are the most important reasons to choose a whole life policy.
Every insurer will have slightly different rules for how and when you can access your cash value and how those methods of access affect the amount of your death benefit. Talk to your agent to make sure you understand the best times and ways to access that cash value. When in doubt, ask!
Here at LifeQuote, we’re happy to go over all the whole life insurance pros and cons with you. Call us at (800) 521-7873 or get a free quote to check out prices first.Get a Free Quote Now