Whole Life Insurance
Protect the people you love when you can no longer be there.
Whole life insurance is a type of permanent life insurance that covers you from the day you buy the policy until you die, as long as you continue to pay the premiums. Generally the premiums do not increase over the life of the policy.
Cash Accumulation, Dividends and Loans
A whole life insurance policy accrues cash value on a tax-deferred basis, creating a kind of automatic savings. Some policies also pay dividends1 , that can increase the value of your benefit. And usually you can take some of the cash value of your policy in the form of a loan2.
An Important Tool in Estate Planning
Whole life insurance can be an important element in estate planning because its premiums are fixed, it is permanent, and its death benefits are usually free of income tax. It can help you to maximize the amount you can pass on to your heirs or use to establish trusts, such as a special needs trust.
How Policies are Issued
Most insurers require that you undergo underwriting before a whole life policy is issued. Whole life insurance can be a good option if you have health issues that make you ineligible for group term coverage. And if you are younger and your health is good, you may be able to lock in lower premiums that will continue for the rest of your life and coverage that can never be canceled, as long as you keep your premiums up to date.
Whole Life Insurance Pros
- It never expires. As long as you continue to pay your premiums, you can be confident that your beneficiaries will receive payment when you die.
- In most cases, the premium remains the same throughout your lifetime, making it a predictable expense in your long-term budget.
- The policy’s cash value accumulates tax-deferred each year. In addition, the value of the benefit may increase if your policy pays dividends1.
- The rate of return on the cash value is guaranteed by the insurance company.
- Many whole life policies allow you to take a loan against the value of the policy2.
- As with all life insurance, the death benefit generally passes to your heirs free of federal income tax.
- Whole life insurance can be an important tool in estate planning, potentially helping to reduce estate taxes and fund trusts.
Whole Life Insurance Cons
Initially, premiums can be significantly higher than the premiums for comparable amounts of term life and universal life insurance, especially when you are younger. However, the level premium feature means that when you are older, whole life premiums will be comparable to or even less than the premiums you would pay if you continued to renew your insurance.
The rate of return used to build your cash value might not be comparable to the rates of return of other savings alternatives.
Whole Life Insurance Might Be Right for You If:
- You want level-premium protection that will never expire.
- You want to build tax-deferred cash value that you can access in your lifetime.
- You want to be able to take a loan against your plan, usually on a tax-free basis2.
- You have estate-planning needs that might be met by a whole life insurance plan.
- You want to supplement the survivor benefit of your federal pension.
We’re Ready to Help
You can call (800) 826-1126 or (301) 688-7912 to set up an appointment with one of our licensed Insurance and Investment Consultants. GEBA Consultants understand your federal benefits and work with you to understand your needs and find the best life insurance solution for you. We shop the marketplace on your behalf to find the best plan. GEBA works only with highly-rated, reliable insurance companies, so you can be confident that your benefit will be there when your family needs it.
1Dividends are based on the policy’s applicable dividend sale, which is neither guaranteed nor an estimate of future performance.
2Loans against the policy accrue interest set by the company and decrease the benefit and cash value by the amount of the outstanding loan and loan interest.
- There are expenses associated with life insurance. Generally, life insurance policies have contract limitations, fees, and charges which can include mortality and expense charges, account fees, underlying investment management fees, administrative fees, and charges for option benefits. Most policies have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the policy.
- Life insurance is not guaranteed by the FDIC. Any guarantees are contingent on the claims-paying ability of the issuing company.
- Withdrawals of earnings are taxed as ordinary income and may be subject to surrender charges plus a 10% federal income tax penalty if made prior to age 59½. Withdrawals reduce contract benefits and values.