Frequently Asked
Questions
What is whole life insurance?
Whole life insurance is a type of permanent life insurance that provides lifelong coverage and includes a cash value component that grows over time.
How is whole life insurance different from term life insurance?
Whole life insurance offers lifetime coverage and builds cash value, while term life insurance provides coverage for a specific period and does not accumulate cash value.
Why is whole life insurance more expensive than term insurance?
The higher cost reflects the lifetime coverage and the cash value accumulation, which can be borrowed against or used later in life.
Is whole life insurance worth the cost?
It depends on your financial goals. Whole life insurance can be valuable for building wealth, estate planning, and providing lifelong security.
What is cash value, and how does it work?
Cash value is a savings component of the policy that grows tax-deferred over time. You can borrow against it, withdraw it, or surrender the policy for its cash value.
How long does it take to build cash value?
Cash value growth varies by policy design. Some policies are structured to build cash value faster through higher initial premiums or riders.
Can I borrow against my whole life insurance policy?
Yes, you can take out a loan against the cash value, which doesn’t require credit approval and typically has a lower interest rate than other loans.
What happens to the cash value when I die?
The death benefit is paid to your beneficiaries, but the cash value is typically not paid out separately unless the policy includes specific riders or terms.
Are the death benefits from whole life insurance taxable?
The death benefit is paid to beneficiaries tax-free.
Can I customize my whole life insurance policy?
Yes, policies can include riders, such as accelerated death benefits, disability waivers, or long-term care options, to meet specific needs.
What happens if I stop paying premiums?
If you stop paying, the policy may lapse, but some policies have options to use the cash value to cover premiums temporarily.
Can whole life insurance be used as an investment?
While it’s not primarily an investment product, it offers tax-deferred growth, guaranteed returns, and a low-risk savings component that can complement other investments.
Is whole life insurance a good tool for retirement planning?
Yes, it can be used for tax-free income through policy loans and withdrawals in retirement, supplementing other savings.
Can I surrender my policy for cash?
Yes, you can surrender the policy and receive its cash surrender value, but doing so ends the coverage.
What happens if I borrow from my policy and don’t repay the loan?
Unpaid loans reduce the death benefit paid to beneficiaries. However, there’s no repayment obligation during your lifetime.
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