Whole life insurance is a form of permanent life insurance that provides coverage for one’s entire lifetime as long as premiums are maintained. It also comes with a cash value growth component that accumulates over time, making this insurance type an attractive choice for those looking to help invest in their financial future.

But how does whole life insurance work, and is it the best option?

How does whole life insurance work?

The first step when considering any insurance policy is understanding how it works. With whole life insurance, there are two primary components: death benefits and cash value.

The death benefit portion protects one’s beneficiaries in the event of their death, paying out a predetermined sum to them upon confirmation of the individual’s death. The cash value component is an additional feature often found with whole life policies. Cash value accumulates over time and can be used as an asset source later down the line, whether to pay off debts or fund other types of investments.

How to decide on a whole life policy

When deciding if whole life insurance makes sense for anyone, its cost is a key factor to consider.

Generally speaking, whole life policies tend to be more expensive than other forms of term life insurance because they guarantee coverage throughout one’s lifetime instead of just a fixed period (e.g., ten years). Additionally, most insurers will charge fees or commissions on top of the premium amounts required by policyholders. These fees vary from company to company, so it’s important to research beforehand.

There are online tools like a life insurance calculator that prospective clients can use to estimate what premiums will cost for different coverage levels and term lengths.

The tax implications of purchasing a whole life policy are also essential to consider. While the policy’s cash value component typically grows on a tax-deferred basis, other taxes or fees may be associated with withdrawing from this portion of the policy in the future. It’s important to discuss all applicable tax implications with the insurance provider before purchasing is important.

For those who purchase a whole life policy, it can be beneficial for many reasons, not just death benefits. With its cash value component, policyholders can use it as an asset source later down the line, allowing leverage and liquidity that may not otherwise have been available.

Bottom line

Overall, whole life insurance can be a valuable tool for those looking to secure their long-term financial future, whether planning for retirement or wanting to protect family members in the event of their death. Whether it is a good investment will ultimately depend on one’s financial goals and circumstances.

As with any investment, it is crucial to carefully weigh the pros and cons and consult a financial advisor to determine if whole life insurance is right for one’s individual situation.

Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.  

Coverage is underwritten by American Family Life Assurance Company of Columbus.

In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400.

 Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.

Aflac | WWHQ | 1932 Wynnton Road | Columbus, GA 31999  

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