What Is Whole Life Participating Insurance?
Whole life participating insurance is a type of permanent life insurance that provides lifelong coverage as long as you pay the premiums. The premiums remain the same throughout the policy period, providing a cost advantage even as you age or experience health issues. In addition to insurance protection, the policy has an investment component that accumulates cash value, growing tax-free.
| Benefits of Participating Whole Life Insurance | |
|---|---|
| Death benefit | The death benefit and any paid-up additions are distributed tax-free to named beneficiaries |
| Annual vesting | Policy dividends used to purchase additional paid-up insurance form a new accumulated cash value floor that is guaranteed and cannot be reduced |
| Account growth | Guaranteed cash values and policy dividends kept in your policy are not subject to tax on growth during your lifetime, helping you meet your long-term financial goals and transfer assets efficiently to your beneficiaries |
| Access to cash | The accumulated cash value of your policy is accessible through policy loans, policy withdrawals, or by pledging the accumulated cash value as collateral for a tax-free line of credit, providing added liquidity and flexibility |
Participating whole life insurance allows policyholders to participate in the insurance company’s profits. The company assesses its profits each year and redistributes them to policyholders in the form of dividends. Although these payments are not guaranteed, most companies rarely skip a year of distribution. Dividends can be taken in cash, left to accumulate, or, most commonly, used to purchase additional paid-up insurance.
Participating account assets are managed by experienced investment professionals, and safeguards from high volatility exist through each insurer’s use of a reserve fund. Talk to your financial advisor about how a participating whole life policy can be an integral part of your wealth management plan.
