Whole Life Insurance: The Value of Cash Value

BOSTON, Oct. 8 /PRNewswire/ -- With banks tightening their lending practices, more people are turning to the cash value of their whole life insurance policy to borrow needed funds. Although this is a valuable source of money, some would advise that it should be a last resort until the time is right. WholeLifeInsurance.net discusses the pros and cons of borrowing funds from a whole life insurance policy.

One of the most attractive qualities of a whole life insurance policy is the cash value component. This is an additional account in which the policyholder can deposit a portion of the premium money on a tax-deferred basis. This amount accumulates over time and can be used to invest or borrow against. If the plan is canceled, the holder can gain some or the entire amount of the cash value back.

Another value of a whole life policy is the tax benefit. The interest on the cash value is not taxed every year, as long as the dividends to do exceed the premium amount. Typically, life insurance benefit sums are not taxed as income, although they may be subject to estate taxes and gift taxes. The cash value amount can also be added to the insurance policy to lower the taxes. Because the tax advantages can be complicated, it is advisable to seek assistance from a financial advisor.

Some companies may not allow a person to borrow the cash value of a whole life policy until a few years have passed. When a person is able to borrow, they will be charged interest at a rate set by the insurance company, which can vary. If the policy holder owes money on the account at the time of their death, this amount will be deducted from the cash value or the total benefit amount that otherwise would have gone to the beneficiaries. It is advisable for people to not borrow from their cash value amount prematurely or if they are not in a proper position to pay the funds back without the risk of large penalties to themselves or their beneficiaries.

About WholeLifeInsurance.net

WholeLifeInsurance.net provides a valuable resource to those interested in learning more about whole life insurance. This site also connects people with qualified and licensed providers in their local area. To learn more about the principles that define whole life policies and find out if this type of coverage is right for you, visit the website. You can also learn about savings on premiums and get free quotes from local agents.

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SOURCE WholeLifeInsurance.net