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5 Essential Benefits of Whole Life Insurance

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As you may know, life insurance is the product of insurance companies to protect you from the risk of illness, injury, or death. But specifically, what are the benefits of this type of insurance? Consider five essential benefits that others cannot give you, such as flexibility and reduced taxes in its investment aspect.

Lifetime coverage

Whole life insurance, the name says it all. For other types of insurance, when your policy expires, your coverage ends. For whole life insurance, you are insured when the policy is valid for the rest of your life. It does not always mean that you have to pay the premium for the rest of your life. Most companies offer a limited payment whole life policy. You have the flexibility to choose to pay off the policy ahead in a 20- or 30-year period, for instance, depending on your financial condition. Let’s say you buy whole life insurance at age 26, and you choose to pay it off in 30 years. When you retire at age 66, you do not have to pay any more, but you are still insured for the rest of your life.

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Premium won’t change

Premium is the amount of money you pay to the insurance company every month for the policy you choose when you make a contract. While other types of insurance may require premium adjustment over time, whole life insurance guarantees a fixed premium when you sign the contract for the rest of your life. The premiums will be higher when you are older because insurance companies will have to cover more risks. So, if you buy whole life insurance at an early age, let’s say at 25 when you are 50, the premium stays the same at the age 25.

Besides, you can choose to pay premiums every month, every quarter, every six months, or every year. The yearly premium payment is, in general, a bit lower than the sum of the monthly payment. But the important thing is you can always change this at any time, depending on your financial situation.

Cash value benefit

You may think that the amount of money you pay is forever locked in your whole life policy unless you pass away and someone else takes all the efforts you work your whole life for. One key feature of life insurance that many other types do not have is the Cash value. It is the amount of cash that you can access while you are still alive.

When you pay a premium, a part of it goes to the management fee, cost of insurance, and others; the rest is deposited to the cash value. This number will build up over time. There are many ways to access your cash value.

Pay the premium

Life is hard sometimes. When you are in financial trouble, you can use the cash value to pay the premium. Most insurers are willing to offer this payment, so you ask them and not let your policy lapse.


If you need money, you can withdraw and spend it for your purposes. This income is tax-free. Just remember that the death benefit will be deducted from the amount that you withdraw. 


Unlike withdrawal, you can borrow from the insurer against your policy benefit. This loan is tax-free, with an interest rate lower than most of the bank’s loan interest rates. You can use this money for emergency needs such as debt, expenses, vehicles, etc. Then you can pay it back later. Technically you do not have to pay back because you borrow your own money. But if you do not, the loan and accumulated interest will hurt your death benefit.


This is the last thing you should think of, but it is also an option. Because of the termination fee, you can permanently terminate the policy and get the cash surrender value, which is a little less than your cash value.


On top of the accumulated cash value, another benefit of whole life insurance is the dividend. This dividend is like profit for shareholders in traditional companies. Depending on the insurer’s financial performance, you will get a percentage of the company’s profit. Different companies have different policies that may distribute dividends to you every year to every decade. It is up to you to choose how to use the dividend. You can:

  • Receive cash, check.
  • You can use it to reduce the premiums.
  • You can buy more additional insurance products.
  • Add to your cash value. This way, you can boost building up your cash value to be eligible for withdrawal or loan.

Some companies guarantee you will receive dividends each year even if the company’s performance is not good enough. With this option, usually, your premium will be a little higher than companies that do not guarantee dividends. 

Tax advantage

You have a tax advantage in many ways.

Death benefit

The money you receive is tax-free for inheritance income because the deceased person already paid the tax. So, when it is passed to someone, you do not have to pay tax. But there may be parts of the money you have to pay tax, such as retirement salary. Like inheritance income, whole life insurance is also tax-free. 

When you pass away, your beneficiaries will receive the face amount, which is not counted as taxable income. This helps your beneficiary avoid a significant tax amount on it.

Cash value 

When you pay the premium, the cash value will accrue without being taxed. So, it builds up faster. When you borrow against your cash value, the amount you borrow will not be taxed even if it exceeds the cost basis. When you withdraw money from the cash value, you also get a tax advantage. Because if you withdraw an amount that exceeds the cost basis, only the excess is taxed.

Many people take these tax advantages to invest for retirement or save for future plans.

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You can see whole life insurance as a combination of insurance and investment. Like other insurance policies, it gives you a lifetime of peace of mind. Still, it also helps you accumulate tax advantages and flexibility in accessing cash value for the future. For more information, please contact us via here or the chat bubble at the right corner.

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