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How Does Whole Life Insurance Work? Costs, Types, Faqs

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whole life insurance

If it’s a permanent life insurancepolicy with cash value, the nonprofit wouldn’t have to wait until your death to get a payout. It could surrender the policy for the cash value immediately. Insurance coverage is guaranteed as long as premiums are paid.

It provides coverage for your entire life, as long as you pay the premiums. Whole life insurance plans offer permanent life insurance protection that comes with fixed level premiums which are payable for a given number of years as well as insurance protection that’s there for life. One of the many uses of life insurance is providing for your loved ones’ long term future.

Where LINK by Prudential is made available in connection with certain Financial Wellness products, access is made available through Prudential Workplace Solutions Group Services (“PWSGS”). PWSGS provides access to a number of Financial Wellness products, services, seminars and tools offered by PWSGS, its affiliates or third parties. PWSGS is a subsidiary of Prudential PWSGS is not a licensed insurance company, does not provide insurance products or services and does not provide financial, investment or other advice. Individuals should consult appropriate professionals when making financial, investment and tax decisions. These benefits come standard with every whole life policy. You can get a life insurance policy to cover burial costs and many other uses.

You also have the potential to earn dividends with whole life insurance, depending on what company you purchase the policy from. Navy Federal Financial Group, LLC is a licensed insurance agency. Non-deposit investments, brokerage, and advisory products are only sold through Navy Federal Brokerage Services, LLC , a member of FINRA/SIPC and an SEC registered investment advisory firm. Deposit products and related services are provided by NFCU. All eligible children and future unborn children, after reaching 15 days old, are covered.

The interest earned is tax free, which makes it even more lucrative. Although policy loans are not required to be paid back, it is recommended. The insurance company charges interest on the outstanding policy loan but does not require payments to be made.

Read our whole life insurance reviews below to find out what others are saying about this policy. This additional coverage is added to your original coverage amount, can earn future dividends and has its own cash value that can grow over time. Because the insurance is “paid-up”, you won’t pay additional premiums on the added coverage. The cost of not having a plan in place for the unthinkable is much higher than the cost of term life insurance. Let’s say you get term life insurance when you’re 30 years old.

Term life insurance is designed to last a specific period of time, called the term length, ideally when your family is most financially vulnerable. Paid-up life insurance allows you to keep your policy without paying any premiums. Once you have built up a sufficient cash value in your policy, you can use your cash value to purchase a reduced policy amount, and make no further premium payments. Your policy may allow you to access empower insurance some of the death benefit in the policy under certain conditions if your policy has accelerated death benefit riders. There are long-term care, disability, chronic illness and critical illness riders that can provide you with a sum of cash up front when you need it. If you don’t want or need the life insurance coverage from your policy anymore, consider simply surrendering the policy back to your life insurance carrier.

With Whole Life Insurance, thepremiumanddeath benefitare determined at the start and remain the same throughout the life of the policy. The policy is guaranteed not tolapse, provided you pay your premiums. So, once you’re covered, you stay covered, even if you develop a severe health problem. This is why the performance of a whole life insurance product shouldn’t be compared to the performance of risky assets like equity mutual funds or ETFs. You’ve probably picked up on this already, but our first explanation of term and whole life insurance — that they differ based on the chance of an eventual payout — was the simplified version. A guaranteed or non-guaranteed payout is the defining difference, sure, but from it stem other features that distinguish term and whole life insurance.

Like all other things for purchase in the world, not all products are right for all people all the time. And publishing something slanted like this article is not fair to those people who, trusting your opinion, may pass up on a whole life policy when it makes good sense for them. It all comes down to personality and personal circumstances, along with the details of the policy in question . Furthermore, term life insurance gets more expensive as you age. Additionally, if you develop a health problem, you may become uninsurable.

If you surrender the policy at a later date, the cash value, if any, will be returned to you. Predictable, in most cases premiums are fixed for the life of the insured. You will most likely have to pay back the premiums and possibly any fees or penalties. However, if you are older, that might actually be cheaper than purchasing a new policy. In participating insurance, the excess profits from the premium are shared with the policyholder and are tax-free during the policyholder’s life. For instance, indexed universal policies can be tied to popular stock market indices.

That strength helps underpin its life insurance products, including whole life insurance. Most traditional providers still require you apply with or purchase through an agent. Mutual of Omaha gives customers the choice to buy online or over the phone. From start to finish, applying, being approved and purchasing online takes about a week. Mutual of Omaha also offers whole life insurance for children, which may interest some families.

In one policy I recently evaluated, it would take 35 years, according to the guaranteed rate projections, for the policyholder’s cash value to exceed what she had paid in premiums. Even at the higher estimates from the “non-guaranteed” projections, it would take the client 15 years for the cash value to exceed the amount she had paid in. Similar to a 401 or IRA, the money in the cash value account grows tax-free. However, if you take out cash value that includes investment gains, through a policy withdrawal or loan, that portion will be taxable. Please note, you are not required to provide this consent to make a purchase from these companies.

One Premium, One Plan That Fits Your Whole Life Through

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal. 2 Dividends are a return of premium and are based on the actual mortality, expense, and investment experience of the Company. Policies can be paid with a single premium, premiums payable to 100, or premiums payable up to a limited number of years. Julia Kagan has written about personal finance for more than 25 years and for Investopedia since 2014. The former editor of Consumer Reports, she is an expert in credit and debt, retirement planning, home ownership, employment issues, and insurance.

Liberty Mutual Life Insurance Review – Investopedia

Liberty Mutual Life Insurance Review.

Posted: Tue, 25 May 2021 07:00:00 GMT [source]

This leads to a part where your cash value which you’ve built up in the early years is paying the difference without having to adjust premium amount. Second, the reserve is not identical to the cash surrender value, so this may cause the payable dividend to differ from the results we get from this calculation. So the dividend interest rate simply tells us the number that the insurer will plug into a much larger equation to calculate a policy owner’s dividend for the year. Word of caution, this process is not for the faint of heart and the above-mentioned process will ALWAYS be the easier way to approach this question. He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.

In other words, the amounts are fully taxable until owner has recovered all of the excess over the investment in the contract. In addition, nonannuity distributions from an annuity contract before age 59½ may be subject to a 10 percent penalty tax. Finally, loan provisions of deferred annuity contracts are generally more restrictive than those of life insurance policies. The policyowner agrees to pay a fixed or level premium at regular intervals for the rest of the insured’s life . In return, the insurance company agrees to pay a fixed death benefit when the insured dies if the policyowner has continued to pay the premiums.

It would be a rare bird obviously, and there would be major other issues going on. But I have probably met a handful of people like this in my life — money burns a hole in their pocket. Oh, I can make a pretty coherent evidence-based argument for whole life.

The company’s biggest appeal is the myriad of options for life insurance, which makes it a top contender. We assist millions of people by helping protect the financial future of their loved ones with insurance policies designed to be affordable. 4While living, you can create a legacy by making a lifetime gift of a whole life policy to an irrevocable life insurance trust for a child, grandchild, college or university, or a charitable foundation. Whole life gives you the confidence to know that the people you love are protected—both now and later. Not only will it pay a benefit when you’re no longer here, it also has benefits you can use while you’re living because it builds a cash value over time.

Life insurance costs are largely based on risks to your lifespan and long-term health. But the specifics will depend on how much cover you get, your health and age. So, if your estate is worth £500,000, the inheritance tax after you die would be £70,000. Current IHT rules are that there’s a 40% tax on the value of your estate over £325,000.

The companies of National Life Group® and their representatives do not offer tax or legal advice. For advice concerning your own situation, please consult with your appropriate professional advisor. The most obvious advantage of whole life insurance is the fact that you will have life insurance that is guaranteed to pay out as long as you continue to pay the premiums. These policies are also considered as an asset when determining your net worth on a personal financial statement, and accumulate cash value you can draw from in the form of a loan.

Credit Protection

For these reasons, whole life insurance provides maximum security for you and your family. Whole life insurance policies also have a cash surrender value, meaning the policy itself builds value over time. If the policy is surrendered during the life of the contract the owner will receive the sum of the cash surrender value, even though the insured is not deceased. After your policy is issued, ask for an updated illustration each year from the life insurance company or agent.

Texas Life Insurance Review 2021 – Investopedia

Texas Life Insurance Review 2021.

Posted: Fri, 21 May 2021 07:00:00 GMT [source]

One also has to consider that, for most people, investing on your own will provide a better return than using whole life insurance as an investment vehicle. According to Clark, a Roth IRA is a much more efficient way to save money for the future. For everyone else, the monthly premiums can be prohibitively expensive.

Coverage Estimator

Your beneficiary can be your spouse, children, business partner or even a trust or religious institution. is the original permanent life insurance and is often called traditional life insurance. That makes it difficult to compare one policy with others. And yet there are large differences in prices among companies for essentially the same coverage, industry experts say.

They do not have a fiduciary responsibility to do what is in your best interest–their purpose is not to “help” you, it is to make a sale, period. If the “educated” would tell it like it is, there would be no need for unlicensed financial entertainers. Instead they prey on the financially illiterate who have dedicated their lives to healing the sick and injured. Stop selling doctors products they neither need nor want once they understand how they work.

Best Whole Life Insurance For Seniors

But it added only $315 per year to an example policy we got a quote for involving a 40-year-old Illinois man in perfect health who wants a $500,000 policy with level annual premium payments. In a low interest rate environment where guarantees are scarce, Equimax provides a stable, hands-off investment option that offers tax-advantaged growth. With two plan types to choose from, you can select the plan and features that best meet your insurance and savings goals.

However, that doesn’t change the general principle that it’s not right for the majority of middle to high income individuals. Remember, I didn’t say whole life insurance is always a bad deal. There are always exceptions, and those exceptions are best illustrated by clients placing a high value on the ancillary benefits provided by the policies . Make your insurance plan offerings more comprehensive by adding an employee-paid, Whole Life Insurance option. With Whole Life, employees can fill gaps in coverage and get a lifetime of protection to meet their own specific needs.

For many people, it’s helpful to review why you need life insurance in order to make the determination between term or whole life insurance. Living benefits rider or accelerated death benefitPays a portion of your death benefit during your lifetime if you’re diagnosed with a terminal illness and have a specified life expectancy . If you have a fatal accident, your beneficiaries will receive additional funds on top of your regular death benefit. Think through your motives before canceling, as you can explain your goals to your current insurance agent and the agent may have suggestions on how to accomplish them. There is no cash value built up over the term of the policy.

On the other hand, a term life agent tells Greg he can get a 20-year term with $250,000 of coverage for about $13 per month—that’s a $247 difference compared to whole life. If you take a loan, it’s tax-free, and you can pay it back, with interest. If you make a withdrawal, there are no taxes as long as your withdrawal is less than the portion of your cash value that’s attributable to premiums you’ve paid. If your withdrawal is greater, you’ll owe taxes on the difference because those are investment gains.

There are several types of life insurance available, but the two most common are term life insurance and whole life insurance. Level term life insurance is for a fixed amount of time – usually the length of the mortgage. Whole life policies come with a monthly premium amount that is locked in for the life of the policy without the possibility of change. Term insurance policies require renewal from time to time based on the length of the term selected. At each renewal, the monthly premium is subject to adjustment and is typically raised, because the older you get, the more likely it is that you will die during the term. I can’t say that whole life insurance doesn’t have a place out there.

Once you’ve built up enough cash value, you can borrow against your policy. The interest rates are typically low, and you won’t be taxed. In this way, whole life insurance functions as an emergency savings account. Universal life insurance, much like whole life, is coverage that is considered permanent in nature. You can also build up cash value in a universal life policy like you can a whole life policy. In terms of purchasing whole life insurance, most people will be better served by purchasing it at a younger age in order to secure lower premiums.

They have a long history of paying dividends to policyholders on top of the guarantees. The dividends end up increasing both your cash balance and your death benefit. Most insurance companies will mandate a medical examination by an authorized third party. A life insurance agent can make the necessary arrangements for applicants to meet a paramedic or nurse at a convenient place, whether home, office, or a medical center specified by the insurance company.

Having any chronic illness, diseases, or a family history of conditions such as searching for life insurance with a history of diabetes, can cause your health insurance costs to go up. Several factors go into the cost of your life insurance rates. While both life insurance policy models are useful in protecting you and your family, there are commonalities and differences that you’ll need to factor in to decide on signing on the dotted line. This gives you a timeline to pay the premiums before the full benefits take effect. The younger you are when you buy the policy, the lower the premiums may be.

whole life insurance

With our improved underwriting, it’s a whole different experience for anyone who needs coverage. Learn more about the benefits of insurance and research product details. Life Insurance can help give you confidence that your family will be cared for financially. If something happens to you, they won’t have to pay debts or funeral expenses alone. We want to make reviewing, paying and updating your policy easy and convenient. Here are all the things you can do with MY ACCOUNT, including connecting with our Customer Care team if you have questions or concerns.

You will not convince me of that because you don’t have the clue as to what you are talking about. I have spent almost 25 years research every aspect of financial life. You regurgitate the garbage promoted by investment firms, CFPs, and the mainstream media. This has failed for decades but they still keep beating people over the head with it. You can tell people what they want to hear vs the truth for clicks to sell advertising which of course is the noble type of selling.

As long as the contract terms are met, the insurer will pay the policy’s beneficiaries its death benefit once the policyholder has passed away. Most whole life insurance policies require a medical examination before the applicant is considered. An important feature of whole life and a way that it differs from term life insurance is that it has a cash value. In other words, the policy can actually be surrendered for the cash value of the policy, or a loan can be taken from it.

While there are many differences between term and whole life insurance, the two products have quite a bit in common. The only insurance product that I recommend over anything over is term. I’ve made 10 years as a planner because I present my clients with options and let them decide what’s best for them while never pushing propriety products. I am currently spending $175 a month for a $250,000 whole life policy.

Whole life insurance provides financial support for those that the insured leaves behind. Coverage can provide money to replace income that is lost due the insured’s death. Amounts paid out under the policy could help pay debt, make purchases, or plan for future expenses. If you’re weighing your life insurance options, consider whether you can afford the substantial premiums that come with whole or universal life insurance. However, cash value life insurance may be worth considering if you’ve saved enough for retirement, want to invest with less risk than the stock market and save more than a 401 or IRA limits. The better option between term life insurance and whole life insurance is dependent on your own personal needs.

Gerber Life Whole Life insurance provides financial protection for you and for your family when you’re no longer here. Adults aged 18 to 70 may apply for a policy, and applying is easy. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice.

Some participating policies permit policyowners to surrender paid-up additions without surrendering the base policy. Although it is not a matter of legal right, in practice some companies also will allow partial surrenders of ordinary life policies. In these cases, the insurer reduces the death benefit and premiums in proportion to the reduction in the cash value. Alternatively, policyowners may terminate or surrender their policies and receive the net cash surrender value shown in the policy as of the date of surrender.

Here’s the Math Behind a Whole Life Insurance Policy – Barron’s

Here’s the Math Behind a Whole Life Insurance Policy.

Posted: Sat, 19 Dec 2020 08:00:00 GMT [source]

Conversely, if the implicit rate is lower than the after-tax borrowing rate, the policyowner should elect to pay premiums quarterly or monthly. In the early years, the amount of protection is lower relative to the premium spent than with term insurance. However, later, as term premiums rise while the premiums for ordinary life remain level, the reverse typically will be true. As you can see, blending a whole life policy with term insurance can reduce costs significantly. If all you want is an instant online $1,000,000 whole life quote you can get it in seconds atOnline Whole Life Insurance Quotes or use our quoter. You will be able to compare whole life insurance prices, company strength, cash value growth, and company size.

The combination of permanent low cost life insurance – and the investment provision – can serve them well as they enter adulthood. Whole life insurance could be the better choice if you are buying a policy for your children. Since they are so young, the premiums will be extremely low. Add to that the fact that there is an investment provision, and your child will not only have low-cost life insurance, but also a budding investment portfolio. Calculate your coverage needs with our life insurance calculator.

But, if you cash in the policy during the surrender period, you basically lose most or all of the value of the premiums you paid in. This happens because, of course, your beneficiaries don’t receive a death benefit – and you either progressive commercial insurance don’t get the cash value at all or lose a portion of it due to the surrender fees. A life insurance company doesn’t want you to cancel coverage, and you could lose a lot of money if you give up your policy shortly after you get it.

Dividend withdrawals or loans will reduce the death benefit and cash values and may affect how long the insurance contract is in effect. For loans, interest is charged daily at the current Foresters U.S. variable loan rates. Universal life insurance policies are essentially higher risk, and higher potential return, compared to whole life insurance. For traditional and indexed universal policies, your cash value will typically have a guaranteed annual rate of return, but this can be quite low or 0%.

People say WL people are all about sells buy so are Advisors who are AUM. Then you have those who are just so arrogant that they can’t see past their own ideas to recognize everyone doesn’t have the stomach to tolerate the market. I saw someone that put all their money in a Roth as instructed by similar blogs but they never allocated the funds so it was sitting in money market the whole time. Whole life insurance isn’t a great investment, but I’m not sure what you need is a good investment. What you need is to be saving a big chunk of your income to hit financial independence ASAP in case you live a long life and a good term insurance policy to cover your insurance need until you do. However, don’t assume that a policy is out of reach because of cost.

Below is an overview of the major types of life insurance offered by Colonial Life. While your age and health can affect your options, your benefits counselor can help you determine what coverage is right for you. There are strategies that can we implemented to reduce the cost of a mercury auto insurance policy. One common strategy is blending a whole life policy with Term insurance to lower the price. And as far as illness and disability- buy health and disability insurance.

The examples agents use when doing this argument discuss something like a million in WL cash value vs a million in investments. The guy who bought the investments instead of the whole life can buy a SPIA that gives him far more permission to spend and he’ll still have a million left over. It’s just a bogus argument all the way around, and the fact that you’re using it suggests to me that you’re part of the problem rather than the solution when it comes to whole life. And then we talked to my father-in-law who got into a Whole Life policy through someone at his Church. That ended up like 80% of other WLI policies and was dumped at a loss. We stayed clear of insurance salesman masquerading as financial advisers after that.

  • If their health is not okay, they are exempted from the policy.
  • Whole life insurance is the best way to get a permanent death benefit.
  • Whole life plans are generally more expensive than term life.

As securities, they are regulated by the Securities and Exchange Commission , the Financial Industry Regulatory Agency , and state securities agencies. As with many other types of investment product sales, all variable life sales must be accompanied by a prospectus that provides details of the product and its investment characteristics. Producers who sell variable life insurance products must hold both a life insurance license and a FINRA Series 6 or 7 registration. The lowest death benefit is developed when you buy the policy, but if the insurance policy’s account value increases beyond a specific amount, then the death benefit can increase as well.

whole life insurance

Assist the exchange of business ownership in the event of your or a partner’s retirement, disability, or death. But know if you have any health issues, you can still get a guaranteed issue policy. And if you live to an old age, you may find a big pay-out is no longer needed because the financial situation of you and your loved ones has changed.

If the policy owner borrows from the policy, the cash value is used as collateral, and interest is charged at the rate specified or described in the policy. Any money owed on an outstanding policy loan is deducted from the benefits upon the insured’s death or from the cash value if the policy owner surrenders the policy for cash. Life insurance and annuities are regulated by state insurance commissioners. The NAIC encourages states to adopt model laws and regulations designed to inform and protect insurance consumers. The NAIC Life Insurance Illustrations Model Regulation (#582) provides rules for life insurance policy illustrations that will protect consumers and foster consumer education.

In that case, additional premium payments may be required to maintain coverage. If you want to purchase term life insurance, you can typically start the process by getting a quote online, directly from an insurer or through a life insurance agent or comparison website. While there’s no one-size-fits-all answer to this question, term life insurance is better suited for most consumers.

Founded in 1860, Guardian is an established company with more than 160 years in the life insurance industry. Convertible insurance allows a policyholder to change a term policy into a whole or universal policy without going through another health screening. Life insurance is a contract in which an insurer, in exchange for a premium, guarantees payment to an insured’s beneficiaries when the insured dies. Progressive Answers is your resource for all questions about life insurance. You need to work with an insurance professional to buy this type of product.

There are certain state laws which may offer additional rights with regard to disclosure of information. If you are covered under these laws, you may have additional rights and some or all of the above disclaimers, exclusions and restrictions may not apply to you. LifeInsuranceRates.com is an insurance provider referral service and not a life insurance broker or provider. Rates and fees will vary between insurers and may be dependent on the state in which you live so be sure to compare the associated costs. You may receive a call from a LifeInsuranceRates.com affiliate to determine which policy will offer you the best coverage.

whole life insurance

Funny as well I have this cheap life insurance policy that guarantees my wife will be rapidly FI if I kick the bucket. Funny that my average investment return for the first 5 years of my practice is around 7-8%. I actually had the complete opposite interaction in my situation. I ended up buying term life insurance and own-occ disability insurance through northwestern. I met with the guy several times, he was old school keeping some notes on a note card and was very nice. You would need to shop for another policy if you wish to still have coverage at the end of your term policy.

And I’m thrilled they aren’t related to the stock market so we don’t have to worry about the potential impact the next market crash might have. Enter your ZIP code below to view companies that have cheap insurance rates. An excellent way to invest your money and get tax benefits is to start your own business. If you haven’t already done so, I would first go to a CFP and offer them a fee to look at your entire financial plan before speaking to any agents about whole life.

This way you would still maintain control over the cash value. Or, you could designate him or her owner as a means to remove the insurance policy from your estate. It is also an exceptional way to start a child’s life insurance program. Your financial investments will grow tax-deferred within the policy. As mentioned above, you will just pay tax on the earnings if you cash out or borrow money from the insurance policy.

whole life insurance

We are contracted with many different senior whole life insurance carriers. And our job is to work for YOU, to find YOU the best rates for YOUR specific, individual circumstances. We use our experience with all of the different life insurance carriers to help find you the best rates that you can qualify for.

Obviously, the older a person is, the more likely they are to die, which causes the cost of life insurance to be exorbitantly high. Because of this, if you’re older and approaching retirement or are in retirement, then purchasing permanent life insurance likely isn’t going to be the wisest use of your funds. This is especially the case if you’re able to self-insure through other investments and have a way to provide for your family members upon passing and cover your financial responsibilities at death. If that is not the case, then purchasing permanent life insurance is something that could be considered, in addition to looking at viable alternatives such as long-term care insurance.

If you don’t withdraw it during your lifetime, it goes back to the insurer when you die. That said, some insurers offer a death benefit along with an added cash value benefit. If you decide to borrow against your policy, your insurer will charge you interest. And if you don’t pay it back before you die, they’ll reduce the death benefit and your beneficiaries will receive less money.

The policy is mostly for seniors and goes up to $25,000 in coverage. Many companies offer GBL insurance to applicants who don’t qualify for other life insurance policies. Before you choose a graded premium whole life policy, you should understand a few important things so you can fully comprehend the pros and cons of this type of policy. The main difference between these two is the premium change. Whole life insurance has the same premiums for the life of the policy, which means higher premiums right from the start. Modified whole premium policies have lower premiums at the beginning of the policy, but then they increase.

Neither The Military Wallet nor Three Creeks Media are associated with or endorsed by the U.S. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss.

During your initial phone call, your financial professional will ask you questions to understand your financial goals and objectives. Easily manage your beneficiaries, change your address, pay your bill, and more. State Farm was founded in 1922 by a retired farmer and insurance salesman. The company has a solid reputation with an A++ rating with AM Best and 19 complaints in 2020 with the NAIC, well below average for a company of its size. Founded in 1845, it has a more than 175-year history of financial success and currently holds an A++ rating with AM Best.

In this article, we discussed all you need to know about whole life insurance for seniors and the ways to get the best policy. You’ll probably have to go through an insurance agent to get a quote. The agent gets a commission of up to a year’s premium for selling a policy, so he or she is not exactly independent. 1Financial professional refers to Financial Consultants , Investment Counselors , and High Net Worth Relationship Managers . FCs, ICs, and HNWRMs focus on a full suite of High Net Worth, Jade, Premier and Advance products and services. Our trained financial professionals can conduct a thorough needs analysis to help you determine what type of life insurance is right for you.

Included with every Funeral Advantage policy is a free membership to the Funeral Consumer Guardian Society® . The FCGS will help your surviving loved ones with the many details that will immediately arise upon your passing. They’ll help price shop funeral costs to protect your family from overspending.

If this happens, you won’t be able to use the growth of your cash value tax free. To avoid this scenario, speak with a Wealth Strategist to make sure your policy is structured for maximum tax advantages and maximum allowed growth. The cash value of whole life insurance is also accessible by the policy owner through a partial surrender, which is a physical withdrawal of the cash value. As mentioned, when withdrawing a portion of your cash value to pay your insurance premium, you may be subject to taxes, dependent on the amount you withdraw.

“If you put money into a life insurance policy, it builds up, tax-deferred. The government is okay with that — within limits,” says Steve Parrish, co-director of the Center for Retirement Income at the American College of Financial Services. Here’s an explanation of the rule change, why it’s a shot in the arm for permanent life insurance, and what this all means if you’re a prospective policy buyer.

whole life insurance