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Florida Whole Life Insurance is a form of Permanent
Life Insurance that provides
lifetime protection for as long as the premiums are paid. In some cases,
whole life policies are designed to mature at age 100, which is the
age when premium payments would end and the cash value would equal
the face amount of the policy. At maturity, the face amount of the
policy would be paid to an insured who is still living.
Whole Life is an investment insurance, meaning that it accrues interest,
and the policyholder may receive dividends from the insurer which can
be used to offset the cost of the policy, increase the amount of coverage,
or buy a supplemental Term Life policy.
Whole Life policy premiums are divided into two parts:
1) Death Benefit
2) Cash Value Account
Death Benefit
Part of the premium in a whole life policy is used to cover the cost
of the death benefit coverage over the insured person’s lifetime.
The so-called "death benefit" refers to the amount of money
paid or due to be paid when a person insured under a life insurance
policy dies. This is paid directly to the beneficiaries of the insured.
Cash Value Account
The other part of a whole life policy is used to build a cash value
account, which is paid to the beneficiary upon the death of the policyholder
in addition to the death benefit. The interest accrued by the cash
value account, usually at a fixed rate, is comparable to that of a
savings account, and this money can usually be borrowed against or
withdrawn in times of need or emergency - one of the things that make
a Whole Life policy attractive to prospective buyers. However, the
money is not available right away- policyholders must wait for the
cash value account to accumulate to a certain amount before they can
borrow against or withdraw it, and must not exceed the limits of the
policy, or it will become forfeit and all coverage will be cancelled.
Tax Benefits of Whole Life
Any money accrued under a whole life policy is not subject to taxation
as long as the policy is in effect, and any money you borrow or withdraw
up to the amount of the premium is also tax-free. If you cancel the
policy at any point, you receive a lump sum of money stored in the
cash value account - including interest! You pay taxes only if the
cash value plus interest exceeds the sum of premiums paid.
Cancelling (or "surrendering") a policy is a good option
for retired persons who have paid off their mortgage and are free of
dependents, who can then use the money in other investments which would
provide a stream of income, or spend as they please.
Forced Savings
The cash value account is in effect a forced savings account, which
is very appealing to consumers. To keep your policy you must pay the
premiums, and as a result you are putting money into savings instead
of spending it elsewhere. Whole Life policies are thought of as a low-yield
investment, but their level of security over other financial ventures
are something to consider when looking into coverage. Premiums are
indeed higher than those of Term Life policies, which may be a drawback,
but the returns may be greater.
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