Whole Life Insurance Pros and Cons

Whole life insurance, also known as traditional permanent life insurance, is one of the most common and oldest forms of life insurance. A whole life insurance policy covers one’s entire life, thereby providing guaranteed financial protection to your loved one as well as accruing cash value and paying dividends to the insured. In other words, it is a savings vehicle that provides tax advantages growth of cash value inside the whole life insurance policy and guaranteed tax free death benefit to your family when you are gone.

Every financial product has its pros and cons and whole life insurance is not immune to this. I guess whole life insurance is probably highly misunderstood and most debatable life insurance policy. Whole life insurance policy do not contains any stock market element so in reality the investment lobby is not getting their share of asset management fee. So, obviously they do not like when people put their money in to whole life insurance instead of any other stock market related products and by the way who controls the financial media? You guessed it correctly – Investment and financial people. There are CNBC, Bloomberg, Fox Business, Wall Street Journal, CNN Money, about.com, Yahoo finance and motley’s fool all control by investment people. How many life insurance TV network and financial medium you can name?

Whole life insurance is probably biggest tax beneficial financial vehicle out there. It’s hidden tax planning tools that rich people have understood it well and used it in abundant. I will list pros and cons of whole life insurance below and you be the judge and decide on your financial future.

Advantages or Pros of Whole Life Insurance

1)      It provides death benefit for entire life not the term insurance, according the Penn State University study the claim rate of tem life insurance is 1%.

2)      It provides tax-deferred growth of policy and tax free withdrawal of cash value via policy loans. Can you provide at least one name of non-life insurance product?

3)      Whole life insurance provides around 5% IRR – Internal Rate of Return over the long term period. Most people do not understand IRR – meaning it is a NET RETURN – net to all the cost and charges. When we talk about 8-10% return on stock market, we are talking about GROSS RETURN – return before all costs, expenses and taxes. Whole life insurance does involve the risk of stock market volatility as it is traditional guaranteed product. Can you find a comparison of whole life insurance?

4)      Cash value inside whole life insurance policy is creditors proof in most states. If you ever got sued or file a bankruptcy, the cash value inside your whole life policy is (it can be millions and millions of dollars) safe. How many investment vehicle you can name?

5)      Whole life insurance cash value will NOT count as your asset for the financial aid calculation purpose when you apply for your child/children’s college admission. This is huge benefit. How about your bank account, stock portfolio and mutual funds?

6)      Whole life insurance death benefit is income and estate tax free if the policy is structure in a right manner. Can you claim the same thing about your home, 401k, business, real estate, investment?

7)      If you add “waiver of premium” rider and if you become totally disable during your premium paying period, insurance company will pay the premium for you up to your age 65 giving you same cash value build up and death benefit. Can your 401k, IRA or retirement plan fund for you if you become totally disable?

8)      I can still go on and on like unlimited contribution, any time access, tax deductable inside pension plan, no mandatory withdrawal penalty etc.

Disadvantages or Cons of Whole Life insurance

1)      You need to be insurable to get all above mentioned benefit. If insurance company cannot approve you on health ground then you are out of luck. You don’t have to be healthy to buy CD, stocks or mutual funds.

2)      It is a long term vehicle so if you cancel the policy in first few years then it‘s bad choice. But you should not get into whole life insurance if you do not have 10+ year time horizon.

3)      You need to keep the policy in force to enjoy the tax free withdrawal. The smart and knowledgeable advisor will help your figure our optimum withdrawal from your policy without making it lapse or cancel.

As you can agree now whole life insurance makes it a very attractive proposition. BeamaLife’s industry leading technology and system compares top, highly rated whole life insurance companies to find the best whole life insurance quotes for our clients. Please call one of our life insurance specialists at (877) 972-3262 to find best whole life insurance quote you and for your family’s financial security or please complete this short online life insurance quote request form now.