BankingPersonal FInance

Five Benefits of Whole Life Insurance

If you’re struggling to figure out if whole life insurance is a good product for you to buy or keep, we have five benefits of whole life insurance to share with you.

Benefit #1: Control

When you have a whole life insurance product, you are signing a contract between the insurance company and yourself. This is a private contract, which is one of the huge benefits of whole life insurance because it means you are in complete control. Unlike a lot of financial products that are out there, if you sign a contract on those, you don’t necessarily have control as to what happens with your account and how you can best manage it. With a whole life insurance product, however, you have complete control over the policy. You can access it to your heart’s desire—without penalties or any issues.

One of our mentors is always telling us: You don’t lose money until you lose control of it. The nice thing about a whole life insurance contract is that you maintain control of it throughout your entire life.

Benefit #2: Cash Value

Every single time you make a premium payment, cash value accumulates inside your policy. The nice thing about having this cash value is that you earn a guaranteed 4% interest on this money.

There are two ways for you to access this cash value: through a withdrawal or through a loan. But here’s something you may not have known: If you access the cash value through a loan, you don’t disturb the compounding inside the policy. That’s amazing because this allows you to kind of be in two places at once, depending on how you use the funds.

On the videos we post on YouTube, we talk a lot about cash value. If you’ve watched them or read this blog, you know we love the infinite banking concept to pay off debt, make investments, or provide a legacy for our family. Now you know the power of being able to be in two places at once because you’re able to do all these things and not disturb the compounding when you take a loan.

Again, you do have access to your funds through a withdrawal, but if you choose that option, you reduce the cash value inside the policy. With loans, you’re collateralizing the cash value, and you’re getting a loan from the insurance company, which leaves your money undisturbed. And that means it earns a guaranteed compound interest rate.

It’s really good to note that your policy is growing at the guaranteed 4% compounded interest rate. Where else can you get that? Right now, your savings account—or even money market account—doesn’t have that high of an interest rate. Of course, we’re just comparing it to the banking function. We’re not talking about any of the investments you’re making.

Benefit #3: Dividends

This is the non-guaranteed portion of your contract premium, which is the dividends that are paid to you. As long as you work with a mutual insurance company, you could possibly be paid a dividend each year. Wondering what a dividend is? At the end of the year, when the insurance company is profitable and they’ve paid all their expenses, whatever is left is returned to the policy owners in the form of a dividend. We call that return a premium. The IRS does not tax you on these dividends, which is another bonus point in favor of whole life insurance.

You also don’t have to do anything to get the dividend. You just have a policy and are able to share in the profits of that company in the form of a dividend. Just one of the great benefits of whole life insurance!

Benefit #4: Riders

Riders are additional features and benefits that can be added to your policy for your specific needs. For instance, if you add a terminal illness rider and you’re diagnosed with a terminal illness, a portion of your death benefit can be utilized to cover your medical expenses. This is similar to a chronic illness rider, both of which give you benefits you can use while you’re still alive.

There are so many different riders you can explore. They will allow you to determine how your death benefit is paid to beneficiaries. One rider that we are very familiar with and use a lot is a paid-up additions rider. That allows you to add cash value inside your whole life insurance policy so you can have that cash value available in the very first year. This is one of the huge benefits of whole life insurance since, typically, with a traditional whole life insurance policy, it takes a few years for that cash value to add up. That means you don’t usually see any cash value until year three or four.

Benefit #5: Tax Benefits

Because you put in after-tax dollars into a whole life policy, the cash value grows at a tax-free rate. That means that for the whole time you have your whole life insurance policy, you aren’t going to be taxed on any of the growth or even the cash value you utilize, as long as you request a loan. And the nice thing about adding after-tax dollars into your whole life insurance policy is the fact that you know what taxes are right now. You have no idea what taxes are going to be in the future.

The Benefits of Whole Life Insurance

Now that you know the five benefits of whole life insurance, do you know how to use your policy? Because you can actually use it right now, today, while you’re alive, by accessing the cash value inside your policy. The thing you need to know is that you don’t have to wait years to access your cash value.

We have written a six-page guide so you can learn how to own your lifestyle and use the benefits of whole life insurance to become your own source of financing. The big part about this is that, because you’re now using your own policy, you no longer have to rely on financial institutions to finance your lifestyle.

At Wealth Nation, we help high achievers and entrepreneurs own their lifestyle. If you want to join a community of high achievers and entrepreneurs just like you, check us out on Patreon, where we share details of how to use whole life insurance to become your own source of financing.

Darius & Carmen Britt

Author Darius & Carmen Britt

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