5 Benefits of Whole Life Insurance You Might Not Know

5 Benefits of Whole Life Insurance You Might Not Know

5 Benefits of Whole Life Insurance You Might Not Know

Suppose you have whole life insurance, but you’re not sure why you have it or what the benefits are beyond being covered in case of death or disability. You might be surprised to learn that whole life insurance can provide several other benefits, some of which may be even more valuable than your original intention of paying off debts and covering funeral costs. Here are five benefits of whole life insurance you might not know about.

1) Flexibility

Whole life insurance is a whole lot more flexible than many might assume. First, you can (and should) make premium payments with your bank account. Secondly, you can set your own premiums to fit your budget at any time during your coverage. Thirdly, even if you stop paying premiums, most policies will still protect you if something unfortunate happens to you (the accidental death benefit). Lastly, if you end up needing more coverage later on in life as family grows or circumstances change, most companies offer convertibility options that let you buy additional coverage without having to go through an entire underwriting process again and pay another premium.

2) Protection against inflation

Let’s face it, our dollar isn’t what it used to be. Inflation can really wreak havoc on a portfolio, especially one based on conventional investments like stocks and bonds. One way to protect against inflation is with whole life insurance. Because its value increases as interest rates rise, you can use whole life insurance to grow your savings for retirement without worrying about how much your money will be worth when you need it. The cost of life insurance usually goes up over time—but since a whole life policy builds cash value as well as death benefits over time, it remains a good deal even as your annual premiums increase.

3) Tax advantages

Aside from providing coverage for your family in case something were to happen to you, whole life insurance has some tax advantages. If you’re looking to build up savings while lowering your taxes, a whole life policy is a good way to go. For example, if you want to contribute $18,000 in 2017 but can only afford $15,000—that’s OK! You can put $15K into a whole life policy and get a tax deduction on $3000 (the difference between what you wanted to pay and what you actually paid). It may not seem like much now, but down the road it could save you thousands—and that’s really worth it.

4) Build savings

One of the best ways to build savings is to use a high-yield online savings account. The interest rate you earn will depend on how much money you have in your account, but online banks can typically offer an APY (annual percentage yield) that exceeds 1%—which means that if you start with $1,000, you’ll likely earn more than $10 over 12 months. One good option is Ally Bank, which offers a 1.85% APY and no fees on its Money Market Account (in addition to a wide range of other bank accounts). This way, even small deposits can start earning interest without long-term commitment or large balances.