Thinking about life insurance? A whole life policy may be your best bet.
Many people put off the decision to get life insurance, but the earlier you do it, the better off you’ll be. For each year you hold your policy, it accrues more value.
Just like any other investment, such as your IRA or 401(k), setting up your insurance policy sooner allows it to gain momentum. Compound interest is truly amazing once enough time has passed!
If you’ve never researched much about life coverage, you might have gotten some false or misleading information about it. In this post, you’ll get the facts right from the experts at Choice Health Insurance Brokers.
The Biggest Misconception About Life Insurance Debunked
What’s the biggest myth about health insurance?
Nobody tells you this myth directly, but most people pick it up based on the name of the product. That myth is: Life insurance can’t benefit you financially while alive. It’s only for your survivors and next of kin. If that was the case, they’d call it “Death Insurance!”
Yes, one of the biggest reasons to start your policy is to provide for your spouse, children, and other loved ones in the event of your death. The money – known as death benefits – your beneficiaries can collect right away, tax-free, will help them meet many financial needs they may incur after the loss of one of your most important assets: Your Ability To Make An Income.
These benefits, help your family in a variety of ways including your final expenses, paying off a mortgage, or even funding college tuition without the need for your spouse or child to take on crushing, life-long debt.
However, let’s look beyond death benefits. Your insurance policy can actually help you grow financial resources while you are still alive as well as provide many lauded over tax benefits for the savy gig-economy investor/house flipper/crytocurrency trader etc.
Life Insurance Gives You Another Layer Of Financial Protection In An Emergency
Cash value can accumulate through your insurance coverage for the whole duration of your policy.
Cash-value life insurance (also called permanent life insurance) expands on what’s called traditional life insurance. It has a death benefit, but also allows you to save, build, and invest money over time.
The value you accumulate can be used for many purposes:
- Paying your monthly policy premium
- Taking out a loan at favorable rates
- Creating an investment portfolio – in some cases with tax free capital gains
- Supplementing retirement income – in some cases withdrawing tax free
The basic goal of any investment is to “purchase income.” You put down money you have at the moment knowing that its long or short-term value will far exceed whatever you could do with it right this moment. For many people, the ultimate goal of this financial planning is to enjoy a comfortable and peaceful retirement.
Your policy works exactly the same way. By holding a policy for as little as five to ten years, you could find you have a substantial amount accumulating from compound interest which, you can then apply to your expenses in retirement, eliminate debt, or in some cases, utilize to invest tax free. What’s more, you continue to be eligible for a death benefit even though you are accessing part of your policy’s total value.
How does it work? All policies differ a little bit in the details.
In general, though, your premiums are broken up into three pools:
- Death Benefit: This pool continues to add to your death benefit and remains inaccessible before then
- Profit: This pool goes directly to the insurer to cover the company’s overhead and its profit projections
- Cash Value: This represents the “equity” in your policy that you can access at need during your lifetime and with the proper guidance from a Brokerage like Choice Health Insurance Brokers, can be utilized in lucrative wealth planning during and after your lifetime.
Why is it so crucial to start your policy as soon as possible? In most cases, Insurers allow younger policyholders to add more money to their cash value every month. As the policyholder ages, the amount allocated for cash value declines while the amount that goes directly to the insurer goes up. Later on in life, you may get very little.
That could be a disappointment for someone who waits well into their career to establish their policy.
But if you start early, you’re benefiting from interest that begins to overtake, and then far outpace, the amount you get in cash value each month. By the time you use your benefits, you could be sitting on hundreds of thousands, or even millions of dollars. Some policies, when structred correctly, allow for tax free withdrawals of that cash value as well.
Whole Life Isn’t The Only Kind Of Life Insurance Where Policy Value Grows
Whole life is often the choice of savvy savers because it is simple, straightforward, and predictable.
Whole life policyholders know that their cash accounts are guaranteed to grow according to the rates that their insurer sets every year. No matter what’s happening with the broader economy or in the stock market, you can be sure you are gaining value. Unless you invest it, the value can never be wiped out by external factors. It’s recession proof.
There are two other common life insurance policies that include cash value accumulation:
- Universal Life Policies: Value accumulates based on the prevailing interest rates at the time
- Variable Life Policies: Value is invested in sub-accounts, and can rise or fall with investments
Whole life policies provide their holders with the least risk. At a time when so many retirement accounts revolve around stock market performance, it is a wise idea to have something in your portfolio where growth is guaranteed. Even if you retire at a time when stocks are in shambles, your life policy can still help you.
One vital thing to remember is that unless you have your policy structured in the proper way, you must use cash value in your policy during your lifetime.
In all cash value policies, save for one, the cash value of the policy is calculated and considered separately from death benefit value, there is no way for you to use one to increase the other. At death, unused cash value won’t go back into your death benefit and won’t be inherited by your heirs: It goes to the insurance company. Having your policy structured by a qualified expert, like those here at Choice Health Insurance Brokers, you can securely pass the cash value of your whole life policy, safely to your heirs, 100% tax free!
Get Expert Advice To Find The Right Life Insurance Policy For You
Once you launch your life policy, switching to another company can put all your stored value at risk. With that in mind, it’s absolutely critical to make the right decision the first time. If you’re unsure on how your life policy is structured, it’s essential to get accurate advice from an expert you can trust. Choice Health Insurance Brokers is here to help!
Call an insurance company, and you’ll talk to an agent whose only goal is to sell you a policy. At Choice, we do more than just health insurance – we customize products around your unique situation and we’re always on your side. We strive to present factual, objective insights about your life insurance options, helping you make an informed decision for you, and generations to come.
To get personalized advice from independent brokers, contact us.