Cash Value FAQs

What can the cash value of a life insurance policy be used for?

  • Building a nest egg for retirement
  • Sheltering money from the IRS
  • Paying insurance premiums
  • Taking out low-interest, tax-free loans
  • Increasing the death benefit to a beneficiary
  • Growing wealth outside of Wall Street
  • Paying tuition
  • Investing in real estate
  • Travel
  • Personal development

How is whole life insurance used for income during retirement?

The cash value of a whole life insurance policy may be used as a source of income in retirement. As long as the amount withdrawn doesn’t exceed the amount paid in insurance premiums, it is tax-free income. For more information about whole life insurance and retirement, schedule a free consultation with a Wealth Strategist.

Does the stock market affect whole life insurance policies?

One of the biggest benefits of a whole life insurance policy is that isn’t subject to the volatility of markets. Dividend-paying mutual life insurance companies comprise some of the biggest and most financially secure institutions in the world, which is why whole life insurance policies are considered to be much safer investment products than stocks, bonds, and traded commodities.

How is the cash value of whole life insurance used for a policy loan?

Policy loans may be taken from your whole life insurance policy without needing preapproval from a bank at an interest rate determined by the insurance carrier. This rate is typically lower than market rate, and loans can be paid back on the policyholder’s terms. Loans on the cash value of a policy are typically not taxed, but any unpaid amount on the loan will reduce the death benefit, as will any interest accrued. For questions about policy loans, speak with your Wealth Strategist.

Are there penalties for withdrawing funds from a whole life insurance policy?

Withdrawals from a whole life insurance policy that exceed the amount of premiums paid will be taxed as income.

How does whole life insurance help protect assets?

Because the cash value of your whole life insurance policy can be borrowed against, other assets aren’t required as collateral for loans. The collateral is the insurance policy itself. Additionally, whole life insurance policy loans can be used in emergencies to cover mortgage costs, medical bills, business costs, and other expenses that threaten traditional assets.

What is the cash value of a whole life insurance policy?

The cash value of a whole life insurance policy is the interest and dividends earned on the value of a policy. Some whole life insurance policies earn cash value faster than others. To ensure your policy is maximizing its cash value, speak with a Wealth Strategist.

What is cash flow insurance?

Cash flow insurance, or cash flow banking, is a concept that allows an individual to capture the opportunity cost of their dollars. The most commonly used vehicle for cash flow insurance is dividend-paying whole life insurance, where cash value is earned on the amount of a whole life insurance policy.

Cash flow insurance structured in a Wealth Maximization Account™ is a key part of The Perpetual Wealth Strategy™ we use at Paradigm Life. Schedule a free consultation to learn more.