The build-up in value of a whole life policy is not subject to current taxation.
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There have been several cases, two in the last month, where people have paid into a whole life policy for a period of time and then years later been blindsided by unexpected phantom income.
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If the policy is more than 20 years old, it's almost certainly a whole life policy, meaning it builds up cash value and can be borrowed against. (This is what reeled in your parents.)Another popular variation was the endowment policy, which pays face value at a specified age, such as 65.
"But you can certainly find situations where you'd be a fool to drop an existing policy, " Mr. Daily says, especially if it's an older "whole life" policy the kind that builds cash value some of which offer a tax-deferred rate of return on the cash value of over 3%.
Is a whole-life insurance policy a better way to escape the estate tax than making gifts every year to your descendants?
Purchasing a more expensive whole or universal life policy could encourage you to get less than you need or force you to drop the policy if financial difficulties make the premiums unaffordable.
There are many variations on the permanent life insurance policy, including whole life, universal life and variable universal life.
Her husband had taken out a whole-of-life policy in 1984 and she took out another one in 1990.
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The trade-off was that, unlike old-fashioned whole life, the effective premiums for the universal policy death benefit rise as the policyholder ages.
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Mutual whole life insurance, a contract that is a life insurance policy with a savings account attached, is also enjoying a major renaissance.
And soon the report of our Quality of Life Policy Group will make another significant contribution to that whole debate.
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