Whole life insurance ensures that beneficiaries will receive a death benefit in exchange for regular, level premium payments.
The death benefit is supplemented by a savings component known as the “cash value” of the policy. Interest may accumulate tax-deferred in the savings component. Whole life insurance’s growing cash value is an essential component.
Paid-up additions, or PUA, are payments made by a policyholder to purchase additional coverage in order to accumulate cash value.
Policy dividends can also be used to earn interest by being reinvested in the cash value.
Investors will receive a return that is greater than the sum of all premiums paid into the policy over time thanks to the dividends and interest earned on the cash value of the policy.
The policyholder has access to the cash value while the insured is still alive, making it a living benefit.
The policyholder can request a loan or a withdrawal to access cash reserves. Up to the value of the total premiums paid, withdrawals are tax-free.
