Wednesday, February 27, 2013

Whole Life Insurance Policy

Highly insurance life Permanent life insurance policies offer opportunities for tax-deferred growth of the cash value and tax-favored withdrawals. Whether it is a whole life insurance policy, a universal life insurance policy, or a variable universal life insurance policy, it can be used as an investment vehicle.

Cash value life insurance policies have a premium value much greater than short term life insurance policies. The excess premium is used to build up cash value, to increase the death benefits and to keep the policy in effect in case of nonpayment. These are ideal for investment as you can take out the money for retirement, to send your kid off to college, or for any other major financial expenditure.

The money invested in investment grade life insurance policies has many tax benefits. The income generated on annual earnings is tax free. Similarly, if you cash out a policy, you can gain tax returns on the protected portion. Furthermore, insurance policies also offer a variety of investment options including stocks, mutual funds, and bonds. These benefits alone make it worthwhile to consider life insurance for investment.

The best whole life insurance policies usually have very high dividend returns each year, and the dividends can be used to build up value in the policy. You can also cash the dividends out and can put them away in a different savings account. However, we recommend using the dividends to build up value in your life insurance policy to ensure a bigger cash-out in the long run. You also have to realize that all insurance policies are not dividend paying life insurance policies.

Another major advantage of using insurance policies as an investment vehicle is that your money is handled by an insurance company not a bank or an investment company. To use the best whole life policies for investment, you have to determine an annual amount you wish to invest. You also have to make sure that you minimize the death benefits.

By minimizing death benefits, you will minimize the internal costs of the plan. An investor with a large lump sum to invest and/or with a sustainable high income for 5 or more years can build up great value in a life insurance policy and can cash it out at any time after five years. If you are looking for a significant cash-out, we recommend building value in your policy for more than 5 years (10 years if possible).

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