Whole Life Insurance: Investment Payouts

Whole life insurance is a way for the policyholder to diversify their investment portfolio while they are living and provide their heirs with a cash allotment after they die. The whole life insurance payout amount varies based on the mortality tables that insurance companies use in order to calculate the cost of insurance and the death benefit. The whole life insurance payout will also differ based on the policy size a person commits too.

Benefits

With whole life insurance, there is a guaranteed payout amount for the heirs. This is because whole life insurance is a type of permanent life insurance, meaning that as long as the premiums are constantly met and paid, the policy cannot be canceled. The policyholder will always have their permanent life insurance in place, thus adding a level of peace knowing that their heirs will be provided for upon their demise.

Investment Component

Whole life insurance has a feature where premiums that are paid into the policy also go to funding a cash value investment. Depending on both the size of the death benefit and the amount of money invested into the cash value portion of the policy, whole life insurance policies can have extremely high payout amounts to the beneficiaries.

Whole life insurance options can have high payouts for several reasons, including that many times the payout can be made without the heir having to pay income tax on the amount. Although a whole life insurance policy can have a high payout, the amount is determined by the policy value, the amount invested over the life of the policy, as well as whether or not the policyholder had a large loan against the cash value of the policy. That debt will need to be paid before the money is distributed.