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 As long as the amount withdrawn doesn’t exceed the amount paid in insurance premiums, it is tax-free income.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.
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.
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.
Withdrawals from a whole life insurance policy that exceed the amount of premiums paid will be taxed as income.
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.
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.