Whole Life Insurance (Permanent Insurance)
Permanent insurance or whole life insurance provides lifelong protection, and the ability to accumulate cash value on a tax-deferred basis.
Unlike term insurance, a permanent (whole life) insurance policy will remain in force for as long as you continue to pay your premiums.
Because these policies are designed and priced for you to keep over a long period of time, this may be the wrong type of insurance for you if you don’t have a long-term need for life insurance coverage.
Cash Value Accumulates Tax-Deferred
Cash values, which accumulate on a tax-deferred basis just like assets in most retirement and tuition savings plans, can be used in the future for any purpose you wish.
Borrow Cash Value
If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide income for your retirement. When you borrow money from a permanent insurance policy, you’re using the policy’s cash value as collateral and the borrowing rates tend to be relatively low.
Unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions.
You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash-surrender value.
If you need or want to stop paying premiums, you can use the cash value to continue your current insurance protection for a specified time or to provide a lesser amount of death benefit protection covering you for your lifetime.
If you decide to stop paying premiums and surrender your policy, the guaranteed policy values are yours. Just know that if you surrender your policy in the early years, there may be little or no cash value.