Special Uses for Whole Life Insurance
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Special Uses for Whole Life Insurance
The combination of life insurance protection and accumulating value makes whole life insurance policies suitable for many uses.
Things To Know
- The most important use is to replace the income lost due to your death.
- You can use policy funds to pay for education, retirement, and certain business expenses.
- You can cancel your policy and receive your cash value in a lump sum of money.
Its main value
The most important use of life insurance is to replace the income lost in the event of your death. It can help pay your family’s immediate and ongoing debts. The cash value of your policy can be used for almost any financial need you can think of. Here is a list of some of the most common uses of cash value:
Education funding
Use the money you’ve saved in your policy to pay for your children’s education.
Retirement funding
You can use the cash value of your policy at retirement to supplement your other retirement funds. You can even use it to purchase an annuity that can give you a source of monthly income for the rest of your life.
Business uses
Business owners can also use whole policies for services such as:
- A deferred compensation program. The equivalent of the deferred compensation is used to pay the premium, and the cash value is used to pay the future benefits of deferred compensation. This type of plan also provides a death benefit should the employee die prematurely.
- Salary continuation. This use creates employee incentives by offering extra retirement and death benefits.
- Split-dollar arrangements. In these arrangements, the employer owns the policy and pays the premiums, but the employee names the beneficiary (the person receiving the benefits). When the employee dies, the employer gets funds equal to the cash value of the policy with the rest going to the beneficiary.
Canceling your policy
You can cancel your policy and "surrender" it back to your insurance company to receive your cash value in a lump sum of money. You can surrender the entire policy or just part of it. You may have to pay a surrender charge depending on the maturity of the policy. You will also have to pay taxes on the interest you made on the cash value.
Whole life insurance provides much more than just financial security in the event of one’s death. The money you build in a whole policy can be used for almost any financial need you can think of.