20 Feb How your life insurance is also an investment
Most people purchase life insurance for the obvious reasons such as leaving behind a death benefit for your loved ones however not many are aware of the available investment like characteristics of a permanent life insurance or whole life insurance policy. These particular life insurance policies act almost like a savings account which can earn interest and can be drawn upon during your lifetime as a loan.
A portion of any qualifying whole life insurance policy is essentially a cash accumulation account. What this means is that every month when you pay into your life insurance policy you are paying the actual cost of your insurance as well as an additional life insurance premium amount which goes in to a cash accumulation or savings type of account.
Key benefits of a cash accumulation account through a life insurance policy
Interest & Tax Benefits
Any money your put in to this account will earn interest and enjoy the tax benefits applicable to all investments. The interest rates on these accounts are often higher than what you would earn in a normal bank savings account and therefore the dollar values in these accounts continue to steadily grow.
Larger Benefit Payout
If you die without ever having used the cash accumulation portion of your life insurance policy the amount in the account will be added to the death benefit and the sum of two is what is paid out to your beneficiary.
Subject to some conditions a policy holder is actually able to take out a loan against their insurance policy during their lifetime to use the money for any financial obligations ex. university education, debt repayment etc. The conditions of the loan are similar to regular loans and you are required to repay the money back in to the account by a certain date. The most favorable part of this option however is the tax-deferred status of the amount in the account whereby even as a loan the amount is not taxed as income and once it's been repaid in to the account it can continue to earn interest.
Occasionally a whole life insurance policy holder wants to exercise their right to completely withdraw the money from the cash accumulation account without the need to repay. In those situations they surrender the account, withdraw the entire amount under the assumption that it will be treated as income and hence taxable. While taxable this still provides an option for a policy holder to use their savings created through a life insurance policy during their lifetime
Pause Insurance Payments
A great benefit of the cash accumulation account associated with a whole life insurance policy is the ability of a policy holder to pause their insurance premium payments during a financial difficult time. What essentially ends up happening is that payments are stopped from the policy holders personal bank accounts and the insurance policy draws the payments from the amount accumulated under the cash accumulation account for as long as there are funds available. This guarantees continuation of coverage and takes a huge load off a policy holders mind.
Whole life insurance policies and the added cash accumulation accounts are a great idea for individuals who want a guaranteed death benefit as well as lifetime savings options. One of the key things to keep in mind specifically in terms of loans and surrendering of accounts is that the amount and timing of those transactions can vary from policy to policy and should be discussed with your Get Life Insurance Quotes broker when your signing up for a life insurance policy.
Our team at Get Life Insurance Quotes is one of Canada’s fastest growing, Canadian owned brokerages. We have a strong commitment to developing and maintaining excellent relationships with large insurance businesses in Canada so as to provide excellent options to our customers. Backed by several years of industry experience, our company mission continues to be focused on making life insurance easy to understand for our clients and making sure they are in possession of the best possible life insurance packages customized to their needs. Feel free to contact Get Life Insurance Quotes if you have any questions or need more information on life insurance quotes.