Benefits Of Whole Life Insurance - From Peace Of Mind To Financial Independence

Let's talk about Whole Life Insurance Investments. They aren't the most glamorous financial tool around. They're safe and dependable and tend to get overlooked by consumers bedazzled by the promise of high investment returns. But if the last few years have taught us anything, it's that safe and dependable are the way to go. And, in fact, the benefits of participating whole life insurance are numerous.

Safety First
To begin with, whole life insurance investments are safe. Life insurance companies have a proven history of dependable performance, usually with better investment returns than banks. There are many reasons for this. The professionals managing funds for life insurance companies are not looking for a quick return on money. They are looking for long-term investments that will provide a lifetime of financial security to policyholders. Investment risks - and costs - are kept low by investing in secure bonds. Risk is reduced even further by diversifying bond type by industry, maturity and geography.

Whole Life Insurance investment portfolios are structured, conservative and regulated according to the state in which they operate. State insurance commissioners in each state mandate reserve pools, and guaranty associations are in place to protect policyholders against a company default. Additionally, whole life insurance investments are protected through re-insurance. Life insurance companies willingly purchase coverage from re-insurance companies in order to provide even more safety to their policy holders.

Why Pay Taxes?
Along with their investment benefits, whole life insurance policies offer many tax advantages as well. Your cash values, for example, accumulate tax free. When you withdrawal money from your cash reserves, this is also tax free as long as the amount does not exceed what you have contributed to the policy. Personal loans to yourself via a participating whole life policy are also tax free (see below). Additionally, your loved ones are guaranteed a tax-free benefit upon your death, and if structured correctly, may be able to receive life insurance proceeds free of estate taxes.

All Whole Life is Not Created Equal
Participating whole life insurance policies offer additional advantages over other types of whole life insurance investments. A participating whole life policy will pay dividends to its policyholders based on the company's annual profits. Premiums in a participating whole life contract are guaranteed to remain level throughout the life of the policy, and once dividends are declared they can not be taken away. Cash values accumulate within your account, and you can access this cash while you're alive - tax free and penalty free. And, of course, your beneficiaries are guaranteed to receive the death benefit.

Whole Life insurance policies are considered a contract and act as legal wills unto themselves. It is simple and easy to change beneficiaries and divide proceeds without going to a lawyer. And because life insurance policies are able to bypass the probate process, your heirs can avoid the enormous costs and fees often associated with an inheritance.

Several other benefits are associated with whole life insurance policies, including:

-Accelerated Death Benefits - receive up to $250,000 of your death benefit while alive if you are diagnosed with a terminal illness.
-Guaranteed Disability Provision - ensures that your base insurance premium continues to be paid by the life insurance company if you become permanently disabled.
-Long-Term Care Riders - provides for payment of long-term care.
-Guaranteed Income Options - turn your cash values into an annuity that will guarantee a lifetime stream of income.

Some of these benefits are available by rider and will vary by policy. You will need to check with your insurance provider to see if these benefits are available to you.

Financial Advantages of Participating Whole Life Insurance
Above and beyond their traditional benefits to policyholders and heirs, certain life insurance policies lend themselves to the idea of Infinite Banking. Participating whole life policies are especially suited for this concept.

In a participating whole life policy, you build cash value within your policy by both paying your premiums and collecting dividends. Typically, there is a guaranteed growth of about 4% built into these policies. This income growth is tax-free. What the Infinite Banking system does is maximize your ability to access the cash value that has accumulated within your policy, allowing you to enjoy your money now and still provide a future of financial security to your loved ones.

By using your participating whole life insurance as a personal bank, you can reap many financial rewards. By accessing your "bank" you are able to loan money to yourself on your own terms. When you pay the loan back you pay yourself - with interest. So rather than make money for the banking industry, you instead make money for yourself. And even if you've borrowed money from your cash reserves, you might continue to earn interest and dividends on your entire cash value amount, although this benefit varies by policy and company.

Unlike with IRAs, a participating whole life insurance policy used for the Infinite Banking concept is not capped by the government or restricted by your Adjusted Gross Income. You are encouraged to make loans to yourself, and in fact, you will actually make more money within your policy if you do. One of the most important reasons this works is because of the way the life insurance loans are structured. They are similar to home equity lines of credit. You only pay interest on the outstanding amount. Therefore, every payment back to the policy that you make reduces the overall interest expense and results in fewer total payments when compared again to a traditional loan. Fewer payments means saved money. By completing the cycle (making all your payments as originally scheduled) the policy will grow much much larger. Cash values within your policy are completely liquid and you can use them in whatever manner you choose. There are no fees or penalties for using the funds.