Do You Own or Rent Your Life Insurance?
A Financial Asset Beyond Protection
Life insurance is a crucial financial tool for protecting your family’s future, and did you know, depending on the type you purchase, it could be leveraged as a financial asset during your lifetime?
This is evident when reviewing the differences between term and whole life insurance. In fact, the comparison between term insurance and whole life insurance is often likened to renting vs. owning a home, particularly in terms of building equity.
Term Insurance ~ Renting
Term insurance provides coverage for a specified period, such as 10, 20, or 30 years. It is often more affordable than whole life insurance, making it accessible for those who need substantial coverage at a lower cost. However, term insurance does not build cash value or equity. Once the term ends, the coverage ceases, and there is no return on the premiums paid. This is similar to renting a home, where you pay for the use of the property without building ownership or equity.
Whole Life Insurance ~ Owning
Whole life insurance offers lifelong coverage, cash value accumulation, and potential dividend participation. A portion of the premium goes towards building cash value, which can be borrowed against or withdrawn. This aspect makes whole life insurance akin to owning a home, where mortgage payments contribute to building equity in the property. Over time, policyholders can benefit from the accumulated cash value, similar to how homeowners can leverage the equity in their property. This makes whole life insurance a way to build financial value beyond just the death benefit.
Which Option is Best for You?
While term insurance provides temporary coverage at a lower cost, it does not build equity. Whole life insurance offers lifelong protection with the added benefit of accumulating cash value and creating a financial asset for the policyholder. Connect with a financial professional to learn more about owning versus renting your life insurance. A financial professional can review your financial situation to help determine if term, whole life, or a combination thereof is best for you and your family.
IMPORTANT DISCLOSURES
Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty if the policyowner is under age 59½.
Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
Product availability varies by carrier, state, and individual eligibility. Not all products listed are available in all states or to all applicants. Product descriptions on this page are for general informational purposes only and do not constitute a solicitation or offer to sell any specific insurance or annuity product. All products are subject to underwriting approval and applicable state insurance regulations. Riders and benefits are subject to additional charges, terms, conditions, and limitations. Variable products involve investment risk, including possible loss of principal, and are sold by prospectus. FundaDream Insurance Solutions, Inc. is a licensed California insurance corporation. Consult the applicable carrier contract for full terms, conditions, and limitations. FundaDream’s charitable giving is made from general corporate revenues at the sole discretion of FundaDream leadership and does not constitute compensation to any licensed insurance professional.
The decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. While the policy allows for loans, you should know that there may be little to no cash value for loans in the policy’s early years.
The information provided is not written or intended as specific tax or legal advice. FundaDream, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
Insurance products and services are offered through FundaDream Insurance Solutions, Inc., California License No. 0M95835