Whole Life
PRODUCT OVERVIEW
If structured properly a policyholder can take a tax-free loan against the cash value in their policy. This loan and interest will reduce the death benefit. The client can repay the loan at their discretion. Some policies allow the client to “withdraw” a portion of the cash value as well.
TWO TYPES OF WHOLE LIFE ARE:
Participating – The policy has the possibility of receiving dividends each year. Dividends are a reimbursement of premium and maybe received tax-free. Some of the common uses of dividends are paid in cash, reduce the premium, or paid up additions (which enhance the cash value and death benefit). Dividends are not guaranteed, they can change every year of the policy. The death benefit could increase over the years due to the Dividends.
Nonparticipating – This policy has a level death benefit and does not have the possibility of receiving dividends. Cash value does not grow fast and the death benefit does not increase.
Whole Life Advantages
Guaranteed premium that will never increase
Death benefit is guaranteed for life as long as premiums are paid
Cash value is guaranteed to increase every year (assuming no loans or withdrawals from the policy)
Most whole life plans offer a paid up policy option: no more premiums using a reduced paid up policy at that time.