What Is Whole Life Insurance
Whole life insurance policies provide coverage for the entire life of the insured individual, making it a permanent form of life insurance. The death benefit doesn’t have to be added to the gross income of the beneficiary, but the policyholder may choose to have the benefit stored in an account and paid out over time. As you pay premiums into the policy, you can also accrue value in the form of a cash savings component. The cash value of your policy can be tapped into via loans that must be paid back over time.
How Does The Cash Component Work?
As you pay your premiums, part of the payments you make can be invested in the cash value of your policy. The cash value can also gain dividends and earn interest, allowing your policy to grow even further in value over time. Many policyholders choose to reinvest their interest and dividends to ensure the highest value for their policy.
If you take a loan out from the cash value of your whole life insurance policy, it must be paid back within a reasonable period of time as determined by the terms of your policy contract. If the policyholder passes away before paying it back, the owed amount will be deducted from their death benefit payout. Therefore, it is important to always ensure that you return any money taken out of your policy to ensure the financial stability of your family.