Insurance is the layer of security most of us explore as we navigate the tribulations of life. So uncertain is the world we live in, and so full of eventualities that can derail plans, that not having insurance can be unnerving.
According to KFF data, 36% of American adults report skipping or delaying healthcare due to the associated cost. For uninsured adults under 65, a stark 75% had to forego the necessary care.
Besides health insurance, life policies are also keenly sought after to protect loved ones from having their lives upended. McKinsey highlights the need to deepen the sentiment, as insurance demand has slowed after the post-COVID-19 surge for mortality protection.
The drivers for this slowdown are economic uncertainty and inflation: two factors that ironically also make financial security more invaluable.
From term plans to whole-life solutions, multiple strategies exist to offer policyowners the financial security (and mental peace) they desire. While the former applies to fixed ‘terms,’ the latter is a more straightforward and hassle-free approach.
We have outlined the benefits of whole life insurance plans to help you in this quest to become more financially sound.
1. Financial Support for Dependents
The most sought-after benefit of many life insurance products is the support they provide to your loved ones when you’re not around. A whole life policy can be an effective way of securing the future of your children and other dependents.
For example, suppose you opt for a 10-Pay plan. You will be required to pay ten premiums, after which your policy will be considered paid for life. (It works similarly for a 20-Pay plan.)
Once you have completed the required payments, you can be assured that your family will have financial support to see them through after you. It’s the most reassuring kind of financial security one can have.
2. Ability to Get Loans Easily
Life tends to throw curveballs at the worst moments. A sudden medical emergency may require you to collect a significant amount of cash in a limited time. Or you may need a mini fortune for home repairs after an abrupt weather event, which, by the way, climate change has made more likely than ever.
Whole life insurance makes it easier for you to get the required loan against the accumulated cash value of your policy. According to 1891 Financial Life, a policy owner can borrow against the cash value if they have a financial situation. Alternatively, they can also use it as collateral to apply for a loan from elsewhere.
Having this go-to option for last-minute funding can help you feel more secure as you take risks in your personal and professional life.
3. Tax Deferred Payments
Another advantage of a whole life insurance solution is that it is tax-deferred. So, any interest you earn will not be taxed if you maintain adequate funds in the policy.
A Business Insider expert feature highlights that whole life products can provide tax-free dividends going up to 3% or more. They can build up a veritable pool you can use after your retirement, enhancing your financial freedom.
Typically, the IRS will charge a tax only on the amount that goes beyond the policy basis, i.e., the premiums you have paid. It means you will be tax-free if you withdraw money that is lower than this basis amount.
The USA Today observes that these tax advantages encourage many HNI families to explore such policies. They can enable smoother estate planning and help you build a diverse investment portfolio that won’t be affected by turbulent tax policies.
4. Giving Back to the Community
If life were easier, perhaps more of us would feel equipped to give back to society. ‘Charity’ is often seen as the dominion of the uber-rich, out of reach for those with humdrum jobs. However, being financially secure can help more of us achieve personal goals of empathy and assistance.
If you have a whole life policy with a charitable giving clause, a percentage of the death benefits can go toward charity. In fact, more people who live independently and don’t have children are exploring these routes.
The Charities Aid Foundation reports that people in the UK donated over £15 billion in 2024, despite financial uncertainty. It is anyone’s guess what a more financially secure future may bring. Moreover, being a conscientious member of the larger world can be a special kind of joy.
The bottom line is that the benefits of life insurance policies are not restricted to people with dependents. Besides the death benefit, these products can also assist high-wealth households and older adults with healthcare needs.
Takeaway
Try hard as you might, life can be impossible to control or tame. It takes its own winding routes, exposing you and your family to exhilarating ups and upsetting lows. The best we can do is to stay prepared, and that’s exactly what an appropriate insurance policy can do for you.
Whole life policies can be pricier than term plans, but they are, in the closest sense of the word, permanent. The associated financial security can bring you excellent mental health advantages, which bodes well for a longer life ahead.
