The Many Advantages to a Whole Life Policy

A key advantage to purchasing foresters whole life insurance is having a fixed and known annual premium. The insured will also have a guaranteed ceiling on mortality and expense charges and guaranteed floor on interest credited to cash values.

The cash value interest or earnings accumulate tax-free or tax deferred, depending on whether gains are distributed at death or during your lifetime. Whole, or ordinary life, through the combination of guaranteed cash values and dividend formulas, frequently pays higher effective interest on cash values than is available from tax-free municipal bonds.

An option to borrow against your policy

Policyholders can borrow cash values at a low net cost. Although policy owners must pay interest on policy loans, cash values continue to grow as the insurance company credits at least the minimum guaranteed rate in the policy. Consequently, the actual net borrowing rate is less than the stated policy loan rate.

Keep in mind that life insurance proceeds are not part of the probate estate, unless the estate is named as the beneficiary of the policy. Therefore, the beneficiary can receive the proceeds without the expense, delay, or uncertainty caused by administration of the estate.

There is no public record of the death benefit amount or to whom it is payable, and in most cases, the death benefit proceeds are not subject to federal income taxes. The death benefit proceeds are often fully or partially exempt from state inheritance taxes unless payable to the insured’s estate.

It’s also nice to know that cash values are not subject to the market risk associated with longer-term municipal bonds and other longer term fixed income investments. Plus, policyholders can also use life insurance policies as collateral or security for personal loans.

“Level premium whole life” is the preferred type of policy when the need for coverage is long-term and you have a desire to maintain a relatively fixed annual premium cost. For many families, it is perhaps the most affordable form of long-term coverage for those principal breadwinners. Speak to an agent about foresters whole life insurance today.