Whole life insurance

A life insurance death benefit is the tax-free payout to the beneficiary or beneficiaries, offering financial support when the insured person passes away.

Whole life insurance offers 3 important tax advantages that can be useful additions to a comprehensive financial strategy:

1. A tax-free death benefit: The death benefit paid to beneficiaries is typically not subject to income tax.
2. Tax-deferred cash value growth: Any cash value within a permanent life insurance policy can grow on a tax-deferred basis until a withdrawal is made.
3. Tax-free policy loans: Policyholders can borrow against the cash value of their life insurance policy without facing immediate tax implications.

With whole life insurance, premiums are typically paid for the entire duration of the policyholder’s life or up to a specified age, depending on the terms of the policy.

Term life insurance covers you for a set length of time, or term, typically 10 to 30 years. If you pass away during that period, the insurance company pays a death benefit in the amount you choose.

Whole life insurance is intended to last a person’s lifetime. The premium is generally higher than term life insurance because it not only funds the tax-free death benefit, but a cash value account. In addition to the death benefit, the policy’s cash value grows over time and can be used for a number of purposes, including low-interest loans, while the policyholder is alive.