FAQ: Who Benefits from Whole Life Insurance?
Term life insurance is a type of life insurance policy that guarantees a death benefit will be paid to the heirs of the policyholder. The only function of term life insurance is to pay money upon the death of the owner of the policy and only the heirs will benefit from this financially. The coverage for term life insurance is limited to a brief period of time or a predefined “term.”
Whole Life Policies
Whole life insurance policies are like a term life insurance policy taken x 10. Not only is there a death benefit to be paid to the survivors of the policyholder, the policy builds cash value and the policyholder can benefit from their whole life insurance policy while they are still alive.
While a whole life insurance policy is being paid off, the policyholder is not only paying off the insurance features of the account but is also funding a type of “savings account.” If the policyholder lives long enough for the fund to be paid up or to accrue a significant amount of cash value, the policyholder can benefit from their whole life insurance as they can tap into their investment, and depending on the policy, make cash withdrawals or loans against the account value.
Additionally, the policyholder will benefit from a permanent life insurance policy as the money that has accrued and the additional profit that has generated is done on a tax-deferred basis. The holder of the permanent life insurance policy will benefit from the tax-deferment until the withdrawal their money.