What You Need to Know About Whole Life Insurance

Deciding what kind of life insurance is right for you and your family can seem daunting, but it doesn’t have to be.

The more you know about your coverage options the better able you will be to determine which is the best fit for your family.

For many, the best fit is whole life insurance.

Learn how whole life coverage works, how it differs from other life insurance policies, and determine if it’s the right policy for you.

What is Whole Life Insurance?

Whole life insurance is a form of “permanent” life insurance because it covers you for a lifetime.

A whole life policy pays out death benefits to your beneficiaries regardless of when you pass away – be it fifty years from now or in two days. Your whole life premium payments remain consistent and predictable, even if your health declines.

In addition to guaranteed lifelong death benefits, a whole life insurance policy has the added advantage of a cash-value savings account.

Advantages of whole life:

  • Lifelong protection that assures your policy will never go down in value or expire.
  • Guaranteed death benefits for your loved ones.
  • Steady premium rates that won’t increase.
  • Cash value, that you can borrow against, from a portion of your premium payments which build as a savings account.


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How Whole Life Benefits Work

The certainty that whole life coverage provides makes it a very attractive life insurance option for many. Aside from attempting fraud or failing to make payments, nothing can cause a whole life policy to be revoked or canceled.

Once the policy is in place and premium payments are being met, there are no follow-up health assessments or payment increases due to increased age or failing health.

At the time of your death – regardless of when that may be – your beneficiaries will receive a tax-free death benefit.

How the Savings Element Works

When you make your payments, a portion of your premium goes into an investment account known as the “cash-value”.

Earning and growing over time, you can borrow against the cash value of your whole life policy.

Your cash value can be used like a loan, minus the credit checks and underwriting fees, which can remain outstanding for as long as you like.

If you want to put a down payment on a new home, help fund your kids’ college tuition, or buy that RV you’ve been dreaming of, your cash value can often be obtained at lower interest rates and without the credit checks that come with a traditional bank loan.

When you want to borrow cash from your whole life policy, you can generally withdraw tax-free up to the amount that you’ve paid into your policy in premiums. Any withdrawals that exceed the amount you’ve paid into your policy is subject to normal income tax.

Whole life loans must be repaid with interest. If you should die before your loan is paid back, the balance due will be deducted from your policy’s death benefits before your beneficiaries receive their payout. So be cautious when borrowing against your cash value- you could be borrowing against the financial future of your loved ones.

One final option for the cash value you’ve accrued with your whole life policy is to surrender the policy and death benefits in exchange for the cash the policy has earned.


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What is Term Life Insurance?

What is Term Life Insurance?

Term life insurance is a simple and cost effective way to be sure you can provide for your family, no matter what the future holds.

Read Blog >>

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Whole Life Insurance vs Term Life?

What’s the difference between whole life and term life insurance? Think of it as buying a house vs renting.

Buying a house may cost more and be a bigger commitment but, in the end, you have something to show for it that belongs to you.

Renting is a better choice if you’re not looking for any kind of permanent reward or ownership: you just want a good solid roof over your head.

The permanence of a whole life policy and the added savings element combine to make a very attractive package, but this policy comes with a much higher price tag than a term policy.

Covering you for a select period of time with lower premiums and no attached savings accounts, term life insurance is a popular choice for people who only want coverage for a certain amount of time.

With term life, you can opt for coverage spanning terms that typically last from 1-30 years.

With term life, as long as you stay current on your premium payments, your beneficiaries will receive the full death benefit if you pass away during your selected period of coverage.

For those who want coverage so that their young family will be able to function normally if they are to pass, a term life insurance policy will typically last long enough to make sure that they are covered.

But for those who are in need of life insurance coverage that is guaranteed into old age, want to be sure that their premium payments will go towards guaranteed benefits for their loved ones, or want their life insurance policy to have an investment element, whole life is the path to take.

Who Needs Whole Life Insurance

While it’s not the perfect policy for everyone, a whole life insurance policy could be the right choice if you:

  • Have a lifelong dependent, such as a child with special needs.
  • Want to start saving for a future expense but are looking for a simple method for investing.
  • Want to lock in your life insurance premium rates when you’re younger and healthier.
  • Want to borrow against the savings element in the future to help pay for large life expenses like buying a house or paying college tuition.
  • Want to add to your inheritance planning so you can utilize your cash value benefits to pay estate taxes or equalize inheritance to heirs.

Offering locked-in lifelong premiums, lifelong death benefits, and a cash value savings element, whole life insurance is a well-rounded package that will help support your loved ones when you pass, no matter how soon or far into the future that may be.

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InterWest is a full-service insurance brokerage providing commercial, employee benefits, surety and personal insurance solutions. Our guidance exceeds the simple issue of premium to also providing claims advocacy and stewardship as well as risk management tools to help protect your assets and reduce costs.

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