Can I Borrow Against My Whole Life Insurance Policy
A. A whole life insurance policy not only provides cash value but also has no date of expiry, which enables the policy holder to easily borrow against their such a policy. For more details regarding borrowing against your whole life insurance policy, you can contact your insurer who can guide you better.
What Is The 7 Pay Test
The 7pay test is the amount of time and the limits of the amount of money that you can put into a life insurance policy for the first 7 years. In fact, Congress passed a law in 1988 called the Technical and Miscellaneous Revenue Act or know as TAMRA.
Before TAMRA was placed into law life insurance contracts were very attractive. Before 1988, this money grew tax-deferred and a large sum could be withdrawn tax-free.
Overall, any withdrawal made before 59 1/2 will be subject to a 10% tax.
The death benefit will always be tax-free!
Whole Life Insurance Riders
The riders you select for your whole life policy also have an impact on your rate, as well as on your policys performance.
Adding a term rider to your policy can help maximize your initial death benefit, while simultaneously keeping whole life insurance costs low.
Further, through the use of a paid up additions rider you can overfund your life insurance. The main benefit of doing this would be to maximize your cash value growth early on.
Some great places to start your whole life education would be:
So, here is a brief breakdown on what whole life insurance is and the benefits it can provide you.
Whole life is cash value life insurance. You pay premiums into the policy in order to secure certain guarantees.
The first three guarantees are exclusive to whole life:
- Guaranteed Death Benefit
- Guaranteed Level Premium
- Guaranteed Access to Your Money
A guaranteeddeath benefit provides a payout to your beneficiary no matter when you die, as long as you make your required premium payments. The life insurance payout is not taxable to your beneficiary.
Guaranteedtax deferred cash value growth provides that your policys cash value account will continue to grow year after year.
Guaranteedlevel premium means that your premium payment will remain level, or fixed, for the duration of the whole life policy. Unlike many other types of life insurance, your premium will not change.
Paid-up additions benefits are twofold.
Read Also: Do Parking Tickets Affect Car Insurance
Single Premium Whole Life Withdrawal Options
SPL policies give you complete control over your financial investment, providing access to the cash value for emergency situations, retirement, or other possibilities. One way to withdraw the cash in the policy is by taking a loan.
You can typically consider a loan equivalent to 90% of the policys cash surrender value. This will certainly decrease the policys cash surrender value and death benefit, but you still have the choice to pay back the policy loan and re-establish the full death benefit.
The insurance companies will also allow you to withdraw money and deduct that withdrawal from the insurance policys cash surrender value. The insurers usually have a minimal amount that you can take out. The total you can take out each calendar year without having to pay a surrender fee might be 10% of the premium paid in or 100% of the policys gains, which ever is higher.
Nevertheless, an additional cost can develop from withdrawals or loans from your SPL, since SPL insurance policies are typically considered modified endowment contracts . This means that there is a 10% IRS penalty on all increases withdrawn or borrowed before age 59 1/2. You will additionally have to pay taxes on the profits. Additionally, if you surrender the policy, the insurer will likely hit you with a surrender charge.
Which Is Better Term Or Whole Life
Term coverage only protects you for a limited number of years, while whole life provides lifelong protectionif you can keep up with the premium payments. Whole life premiums can cost five to 15 times more than term policies with the same death benefit, so they may not be an option for budget-conscious consumers.
Don’t Miss: License To Sell Insurance
Types Of Life Insurance Policies
For the most part, there are two types of life insurance plans – either term or permanent plans or some combination of the two. Life insurers offer various forms of term plans and traditional life policies as well as “interest sensitive” products which have become more prevalent since the 1980’s . In New York State, the Department of Financial Services must approve any life insurance policy before a company can issue it to consumers and New York Insurance Law provides for standard provisions that must be included in every policy.
Whole Life Insurance Quotes
Please enter your info below for your own personalized sample whole life insurance quotes.
Sample whole life insurance rates are for informational purposes. Your actual rates will vary based on your health, age and policy design.
Yes, you may be able to get the whole life insurance rates above if you are in great health. However, when it comes to personalized whole life insurance quotes, the premium payment you pay for your coverage can vary depending on how your policy is designed.
And how you design your whole life policy will depend on several factors, such as your age, health, needs, goals and objectives.
There is no best whole life insurance because there is simply is no one size fits all policy out there. The best policy for you may not be the best for your spouse, friend or colleague.
That is why at Insurance& Estates we focus on providing our clients and visitors with as much education as possible to help you make an informed decision as to how much coverage you need and also into what life insurance company is best for you.
Death Benefit vs Cash Value
So, here is an important point. The higher your initial death benefit, the more your life insurance will cost. Many people are led to believe they need to maximize the death benefit. However, that is often not the case.
And chances are, you are more likely to live longer, so a policy that maximizes your death benefit as you age, focusing on high early cash value growth, may be the better option.
Which Insurers Offer Single Pay:
This a complicated question, one which should have a simple answer, but sadly, does not. Which insurers offer Single Pay policies really depends on a variety of factors – such as which State you are located in, and What year it is. Quiet frankly there are not a lot of sales of these types of products, so the list seems to be changing.
Another consideration is which chassis the policy is built on: Whole or Universal. If you are looking for a full set up options – email us what you are looking for and we will come up with options for you.
How Does An Spl Policyholder Tap Their Cash
SPL policies allow access to the cash value for emergencies, retirement, or other opportunities. Loans are one way to get your cash. Generally, loans equal to 90% of the policy’s cash surrender value are available. This will, of course, reduce the policy’s cash surrender value and death benefit, but you have the option to repay the loan and re-establish the benefit.
Don’t Miss: Do Parking Tickets Affect Car Insurance
Single Premium Whole Life Tax Treatment
Your financial investments will grow tax-deferred within the policy. As mentioned above, you will just pay tax on the earnings if you cash out or borrow money from the insurance policy. Your designated beneficiaries, however, will get the benefits income-tax free with no time delay and cost of probate. This is a critical benefit, as you do not want the efforts made and expense you committed to providing death benefits for your surviving dependents to be muted by unnecessary time delays and probate costs.
Whole Life Insurance Rates By Age With Charts
We often get the question How much does whole life insurance cost, so we put together the following whole life insurance rates by age charts below.
We have whole life insurance charts that give examples of whole life insurance quotes by age below. But these charts only tell half the story. The true cost of whole life insurance is determined by several factors, which we elaborate on below.
Also Check: Life Insurance Licensing Exam
Pros And Cons Of Single Premium Life Insurance
The type of life insurance policy thats right for you depends on a lot of things such as your needs, expectations, and current health condition. Like any policy, a single premium policy has a variety of pros and cons.
- Medical Exam
- Cash value withdrawals taxable
There is an option to get a single premium life insurance policy with long-term care rider. This rider allows you to use your long-term-care benefits pay for nursing home or healthcare due to cognitive diseases or if you are unable to perform 2 out of the 6 activities of daily living. Essentially, this rider turns your policy into a life insurance and long-term-care insurance hybrid.
The LTC rider is a great option and it is important to note that this isn’t only available on a single premium policy, you may be able to get it on more traditional types of policies as well. Just know that if you draw on your benefit to pay long-term care expenses, your beneficiaries may receive a smaller death benefit payout.
This policy contains a cash value. This is a great benefit to borrow from or make withdraws from. There are a few things to note with this:
So while having cash value is positive, there are some negatives that can go along with this.
Is Whole Life Insurance An Option For Senior Citizens
A. Yes, whole life insurance is a viable option for senior citizens as this policy provides comprehensive cover and does not have any age limit attached under eligibility. Following the death of the insured, the beneficiary named in the policy will receive the payout / death benefit. Whole life insurance policies offer a number of useful benefits like tax exemptions, growth of cash value, permanent protection, uniform premium payments, cash access via loans and other withdrawal options.
Don’t Miss: Are Car Insurance Companies Open On Sundays
Sample Rates Single Premium Whole Life Insurance:
Here is a sample rate and case to consider: a 40 year old male, non smoker, in perfect health with no other underwriting conditions.
Should he purchase a single premium Single Premium life policy for insurance, likely for his entire life? Should he purchase a 30 year term life insurance policy for a guaranteed coverage amount until age 70?
$634 per year or $174,835 Once?
If he buys the 30 year term his yearly outlay will be $634 or $19,020 over the life of the policy. Over 30 years he will save $155,815. Without considering any interest it would seem that he comes out ahead with the term policy. However looks can be deceiving. At age 70 he may lose his term life insurance as his rates will skyrocket.
Simple charts can both illustrate honest truths yet hide necessary details. Neither of these two insurance policies are very similar. For those reasons please contact us and we can walk you through your own options. That being said another, potentially more realistic option is listed below.
Single Premium Variable Life
Single premium variable life insurance differs from standard single premium coverage in that the policy’s cash value grows at a variable rate, depending on how you choose to invest it. Your options are limited by those offered by your insurer, but they’re typically similar to mutual funds in that they can track:
- An index
- An equity portfolio
- A money market fund
- A bond portfolio
In a single premium variable life insurance policy, you will not be actively managing the investments. And there are fees associated with single premium variable life insurance, which can vary depending on the investment products you select. Variable life can be a great policy if your chosen investments outperform the expected growth of a lower-risk product, such as whole life insurance, but this is not guaranteed. This, combined with the fees from the management of the investment, can reduce the cash value in the policy.
Read Also: How To Obtain A Life Insurance License
How Single Premium Whole Life Policies Work
A one-time payment yields a fully-paid death benefit that’s valid for as long as the policy remains intact. The death benefit is substantially higher than the cost of the policy. At age 60, it can be double the initial investment. At age 50, it can be four times higher. The younger the insured, the higher the benefit amount will be. The policy grows as long as it stays in effect, yielding dividends at a competitive, fixed rate based on current market conditions and the standing of the insurer. The earnings can be withdrawn as cash or applied to what’s called “paid up additions.” These are additional single premium whole life insurance policies, just like the original, that also pay dividends. Single premium whole life policies come with the option to use up to 90% of the cash surrender value as collateral against a loan. The collateral amount reduces the death benefit and won’t earn interest as long as the loan remains unpaid. When the loan is paid off, the death benefit is restored and the policy again pays dividends.
Benefits Of Single Premium Whole Life Insurance
There are some really good benefits when purchasing an SPWL policy. For example, you have inflations protection. In addition, there are some tax benefits that are tax-deferred if you make no withdrawals.
Furthermore, you will also not have to make premium payments as you paid one lump sum. Here are some of the perks that come with SPWL.
- Single Payment
- Cash Value
Once the premium is paid the life insurance contract is binding between the insured and the insurance company.
Don’t Miss: Does Home Insurance Cover Foundation Repair
About Single Premium Whole Life:
Single Premium Whole Life Insurance is the most popular form of single premium policies. The other being Single Premium Universal Life. What you get with a single premium whole life policy is guaranteed to pay out policy on a simple insurance form. One Payment, One Plan, One and Done.
Single Premium Whole life is occasionally abbreviated at SPWL. So called SPWLs are not as popular as they once were due to Internal Revenue Service tax code changes. That being said an SPWL is a still a solid consideration for a few Americans.
There are two main types of single premium life insurance policies: Single Premium Whole Life and Single Premium Variable Life. Single premium life insurance can loosely be defined as a life insurance policy that has only one large up front premium payment but benefits that generally last your entire life.
What Is Your Purpose
There comes a point in life when the money youve earned is already more than enough.
So you start to go beyond self-interests and think about others
You have already set aside a sum of money that you dont really need.
The primary aim is to leave that behind for your loved ones, a charity or a religious organisation.
But theres also a secondary aim .
And thats to be able to access it in the future. You probably wouldnt need to use that money but its good knowing that its still there if needed.
Read Also: How To Obtain A Life Insurance License
What Is A Whole Life Policy
Whole Life plan is also called as straight life, ordinary life. It remains throughout the insured whole lifetime provided the premiums are paid. A certain aforementioned amount is paid to the nominee in the event the insured dies. The policyholder at any time withdraw the policy or borrow against it. The maturity age for this policy is 100 years. If the insured lives past the maturity age, the policy will become matured endowment. The death benefit under this plan is tax free.
The Disadvantages Of Single Premium Whole Life Insurance
To summarize some of the points made in our MEC discussion:
- Withdrawals and even policy loans are often subject to income tax
- Withdrawals and loans can incur penalties prior to age 59-1/2
- There is also an opportunity cost to paying the entire premium up front, so consider if an SPWL is the best use of a lump sum.
If you dont plan on withdrawing or borrowing against your cash value, a MEC might work for you. But there are other options, even if you dont want to make years of payments.
Read Also: Does Home Insurance Cover Foundation Repair
How To Get Single
As with othertypes of life insurance, the process of getting a single-premium policy begins with a quote and a conversation with an insurance agent or broker. You will be required tofill out an application and go through theunderwriting process, which determines your coverage and rates.
Youâll also need to decide what kind of single-premium insurance you want: whole life, variable life, or universal life. Which one you choose depends on how you want to grow the cash value of your policy.