What is Whole Life Insurance? The Definition of Whole Life Insurance

Whole Life Insurance

For more than one hundred years individuals have used Whole Life Insurance as a method to grow and preserve their money, making Whole Life Insurance a unique wealth building vehicle for your money. It’s a permanent life insurance policy that never expires – as long as the premium payment is satisfied.

Typically, when people think of insurance, they initially think of the death benefit – I would only be using it if I die, right? Well, life insurance will always offer a death benefit, but Whole Life Insurance offers living benefits too.

Features of Whole Life Insurance

Liquidity:

Liquidity is a term used in insurance that references the cash value in a life insurance policy. The cash value is “liquid” because policyholder’s have the contractual right to access it at any time.

After numerous failed financing attempts, Walt Disney utilized the cash value on his life insurance to fund a large part of Disneyland (LifeHealthpro.com). “It takes a lot of money to make these dreams come true,” said Disney (“The Man Behind the Magic: The Story of Walk Disney”).

Borrowing Control:

Cash value can be borrowed at any time through policy loans. Disney took advantage of liquidity and his borrowing control when he financed himself for Disneyland.

Because the insurance company does not determine the pay back schedules on policy loans, this gives the policyholder a very unique amount of flexibility. Cash value can be accessed for any reason – there is no approval process or waiting time.

Guaranteed Growth:

A Whole Life Insurance policy will grow due to interest building on cash value you have accumulated in your policy. Additionally, the dividend payment is calculated based upon the cash value amount, and can become part of the policy growth.

Tax benefits:

Your policy interest grows tax deferred.  The dividends accumulate tax free as well.  When the death benefit is paid, these funds are not subject in income tax, since these proceeds are considered inheritance rather than income.

Safety and protection:

One of the most important contractual guarantees of a Whole Life Insurance policy, is that cash value is not subject to stock market risk.  Additionally, since life insurance contracts are not public record, they have unique state-specific levels of protection against bankruptcy, creditors and other law suits.

Wealth building and strategizing:

By utilizing the borrowing control in your policy you can leverage your cash value to invest in performing assets, like real estate, gold or silver, for example. At the same time, you are still leaving wealth for your family through death benefits.

When speaking about living benefits, this is where Whole Life Insurance separates itself by becoming your wealth building strategy, essentially allowing you to become your own bank.

Read: The Whole Truth About Whole Life

Watch: Teaching Your Children About Money

Listen: The Wealth Standard Podcast