Permanent life insurance (also known as whole life insurance) provides life long insurance in exchange for a level premium payment. Although life insurance is most often purchased to provide a death benefit, it can also provide living benefits. The cash value of a permanent life insurance policy grows income-tax deferred. It can be used to provide an income stream during retirement or can help meet other long-term financial goals, such as fund a college education or pay for a child's wedding to name a few.
The guaranteed accessibility to the cash value makes permanent life insurance one of the most valuable assets people can own. Upon death, life insurance proceeds are received tax-free to a named beneficiary. However, if the policy is surrendered, income taxes are due on the gain. For example, as a general rule, when policy values are surrendered, the amount received is not taxed until it exceeds the amount paid in premiums (your cost basis.)
There are different types of permanent life insurance policies available. Jeff at Richard Financial Resources, LLC makes recommendations based upon a client's needs - whether it be: 1) both protection and cash value accumulation, 2) death protection and higher cash value accumulation or 3) if you are looking to purchase a policy with a one-time premium (perhaps from an inheritance, sale of property or other windfall.) No matter which plan you own, Jeff recommends placing all permanent insurance with high quality companies that have superior and proven track records. Contact Richard Financial Resources for all of your life insurance needs.
Key Policy Features for Permanent/Whole Life Insurance:
- Dividends that can be used to increase policy values (the dividend scale fluctuates with prevailing interest rates and are not guaranteed.)
- Life-long coverage.
- Level premiums.
- Guaranteed minimum death benefit.
- Cash values.
When to Use Permanent/Whole Life Insurance:
- When you need a good foundation of traditional insurance inforce for your entire lifetime.
- When you can commit to paying an ongoing level premium.
- When you need policy guarantees.
- When you want to build cash values with a conservative approach.
- When you want to have a future option to change your policy to "paid-up."
Disclosure: Life insurance guarantees are subject to the financial strength and claims-paying ability of the life insurance company issuing the insurance contract. This is not meant to be tax advice. Please contact a tax professional on your situation.