There are various opinions in the favor of buying whole life insurance policies. However, the benefits offered by a whole life insurance policy are not unique can be easily availed with other policies without having to pay high management costs and broker commissions associated with whole life insurance plans. Given below are some of the major benefits of buying whole life insurance policy: Tax-deferred growth Tax-deferred growth is an advantage of the cash-value element in a whole life insurance plan, meaning, the policyholder is not liable to pay any taxes on the amount of interest, capital gains, or dividends from the policy; provided the proceeds are not withdrawn. However, you can obtain same benefits, by investing the funds in multiple of retirement investment plans, such as traditional IRAs, SIMPLE IRAs, 401(k)s, SEP IRAs, self-employed 401(k) plans, and 403(b)s. In case you are maximizing your input towards such accounts each year, whole life insurance plans can be included in your portfolio. Policy term as long as 100 years A very famous benefit of a whole life insurance policy over a term insurance policy is that the policyholder does not have to lose the coverage amount after a predefined term of policy is over. A term life insurance policy terminates when the policy term gets over, which is at an age of 65 or 70 years for most policyholders. But when you turn hundred, there would be no need of your death benefit. Reason being, the people you would have bought the policy for, would either be independent or would have passed away by then. Borrowing against the cash value without having to pay any taxes Well, even your money standing in a savings account can be used in need and neither do you require paying any fees or commission for it. You self-controlled funds can also be used to purchase a house or to pay your child’s education fees. But what an insurance agent actually means by stating this is that putting your funds in a retirement policy with tax advantage, such as a 401(k) and you may have to pay a 10% penalty at time of withdrawing the amount for any purpose except retirement. In fact, retirement policies, like 457(b)s, might not let you withdraw the funds for any purpose at all. Therefore, it is usually a bad plan to expose your post-retirement life by exhausting your retirement funds for another purpose. It is also not right to mix a life insurance plans with a saving account. So basically, when you take a loan against a whole life insurance plan, you would have to pay interest till the time you repay it and in event of your demise before complete repayment of loan, your beneficiaries would get a reduced death benefit. A whole life insurance policy benefits on development of critical or terminal illnesses In case you develop a specific critical or terminal illness, such as stroke, heart attack, severe renal failure or invasive cancer, then you might get about 25 to 100 per cent of the death benefit before demise. The advantage of this benefit is that these funds can be used to pay your hospital bills and you could be stress-free in you last months. While, the drawback is that your family would not receive the benefit as you wanted them to. In fact, even your health insurance policy could possibly sufficiently cover your medical bills. Additionally, some term life insurance policies also offer this element and thus it isn’t a unique feature of a whole life insurance policy. Some policies require you to pay additional premiums for offering these accelerated benefits, but, a whole life insurance policy, already, is expensive enough to lose the battle on affordability.
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It is never enough just to choose and buy the right life insurance policy for yourself. In fact, as an aware consumer, one should always know his/her rights and duties regarding the life insurance plan, including its coverage and claims. Following are your duties towards your life insurance policy: At the time of buying a policy:
After you have purchased the life insurance policy:
In order to maintain your life insurance policy:
If your policy lapses:
In case you have lost your life insurance policy document:
At the time of a claim:
Following are your rights under a Life Insurance Plan:
In case of ULIPs:
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