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Is whole life insurance a wise financial decision?

A well-rounded financial strategy may benefit greatly from including a life insurance policy. If something were to happen to you, your life insurance would give your loved ones a death benefit that they might use to cover funeral costs, settle debts, or pay for daily living expenses. One option is whole life insurance if you’re shopping around for life insurance. This kind of policy combines a monetary value element with lifelong coverage. You know the cash value you will accrue over time because it builds up at a set rate. But is whole life insurance a wise financial decision? What is whole life insurance? Whole life insurance is coverage that can last as long as you do. The coverage won’t expire as long as premiums are paid. The policy pays your life insurance beneficiary a death benefit after you pass away. Whole life insurance premiums won’t change over time. A portion of each payment is deposited into an interest-bearing cash value account. The cash value part increases at a guaranteed rate of return on a tax-deferred basis. You can either withdraw money from the cash value or borrow against it. The “surrender value,” which is the cash value less any surrender charges, is what you can take if you decide to cancel a whole life insurance policy. Whole life insurance currently has an average dividend interest crediting rate of 4.65%. Are Whole Life Policies a Smart Investment? Whole life insurance shouldn’t be viewed as an “investment” vehicle. Michele Lee Fine, president and CEO of Cornerstone Wealth Advisory in Jericho, New York, says, “Investments are often a balance of risk and reward.” It is preferable to consider whole life insurance as a wise, tax-favored distribution of cash flows. Most of the premiums you pay in the first few years of the policy go toward funding the death benefit, with some of the money going toward administrative expenses. Your cash value account receives the remaining amount. More of your premium is deposited into the cash value account over time. This account’s balance will increase at a fixed rate of return. Most life insurance businesses have holdings in bonds and mortgages with government backing. Most whole life insurance providers are mutual insurance companies that generate dividends, which you can reinvest in your cash value account regularly. The more money you put into the policy over time, the more monetary value you can accrue. Whole life insurance’s predictable cash value increases can be less stressful than other investing options. According to Fine, whole life insurance offers guaranteed yearly, tax-free growth of cash values without any market risk or volatility. However, whole life insurance is not a wise investment if your only requirement for life insurance is to pay a death benefit. Universal life insurance can offer a death benefit for less money. Pros and Cons of Investing with Whole Life Insurance Whole life insurance has both benefits and drawbacks. Here is a summary of the main benefits and drawbacks. Benefits

  • Cash value is accrued through whole life insurance tax-deferred.
  • The ability to borrow against a policy’s cash value or take a withdrawal can be helpful if you don’t have access to other funding sources.
  • The accumulated cash value can be utilized to pay premiums.


  • When you pass away, your beneficiaries won’t get the cash value. Regardless of the cash value, you have accrued, they’ll receive the face value of the policy (less any withdrawals and unpaid policy debts).
  • Whole life policies can underperform in comparison to the kind of profits you might be able to earn with alternative assets.
  • It can take several years of paying premiums before beginning to accrue considerable cash value.
  • If you withdraw or borrow money under a policy and don’t pay it back, your death benefit will be less when you die.

According to Sharfman, whole life insurance is a terrific investment if you’re looking for steady, predictable long-term profits from a tax-advantaged vehicle with a very low-risk profile. It’s probably not the best option if you want to maximize returns at any cost and have a limited time frame. When Should You Avoid Purchasing Whole Life Insurance? Although whole life insurance has advantages, it’s probably not the best option for you if you fall into any of the following categories: • There is a finite period during which life insurance is required. It generally doesn’t make sense to pay higher rates for whole life insurance if you only need it for 10, 20, or 30 years. A term life insurance policy is preferable for pure life insurance at a reasonable price. • You have a high level of investing risk tolerance. People with low-risk tolerance or who want a secure, guaranteed means to accumulate financial value frequently find whole life insurance appealing. • You desire a greater rate of return. The interest and dividends received by a whole life insurance policy may be significantly lower than the earnings you may probably find elsewhere.
Contact Information:
Email: [email protected]
Phone: 8043014291

Stuart Hunsicker is a managing partner, retirement specialist and federal employee benefits specialist here at Purpose Driven Financial Services. As firm co-owner with Zar Razack, the two have a natural chemistry that allows them to work together effortlessly. “Once we decided to really commit to pushing the firm forward, we knew that we could be effective,” Stuart says. “We work very well together and complement each other’s strengths and weaknesses.”Stuart considers himself more of the “analytical and numbers” half of the duo. With more than 20 years of experience in the financial services industry, he has become an expert at assessing each individual person’s situation and deducing how much they might need in retirement. Once he arrives at the target number, Zar steps in as a specialist to design a plan that includes specific elements that will help clients reach that number.A VCU-Richmond graduate with a degree in finance specializing in business, Stuart has seen nearly every side of the financial industry. Early in his career, he worked for smaller firms and was in charge of trading and investment portfolios. He also held a Series 24 license and signed off on variable business within the firm. “I wore a lot of hats,” he says. “I focused on the investment side, but when the markets crashed, I just took too many phone calls with crying voices on the other end.”Those tough phone calls led him into the insurance side of the business. He now considers “retirement surety” his focal point and believes in making sure that each client is prepared for retirement before they move to the next step. Once the retirement plan is put into place, the rest is icing on the cake, helping give the client financial freedom.PDFS certainly isn’t exclusive, but Stuart is extremely passionate about working with teachers and federal workers. His beautiful wife of nearly 20 years, Andrea, is a teacher, so he’s very familiar with the issues they face and tends to gravitate toward clients who serve and assist. He has also experienced many of the hypothetical scenarios he raises to clients. What if a spouse passes away suddenly, or what if you’re forced into retirement early? Stuart has been there, and he knows how to navigate those rocky waters.He and Andrea have one son, one daughter and eight cats. “We’re the crazy cat house,” he says. His oldest cat is almost 20 years old and was the first to join the Hunsicker family, even before Stuart and Andrea married. The first cat needed a friend, of course, so they adopted one more. Andrea always loved tabby cats, so when her colleague told her that a stray tabby gave birth to a litter of kittens in the backyard, the family loaded into the car to have a look. “When we arrived, there were three kittens. My wife fell in love with the tabby, and my daughter took to a different one, then we couldn’t just leave the third one behind,” Stuart says. “At that point we were known for being the cat people, and it was at that point that three more found their way into our family.”Stuart is a massive college basketball fan, even making a trip to the 2022 Final Four. Though he doesn’t have much free time, he and Andrea love to attend sporting events. Stuart also enjoys spending time with family, and they often go shopping, to the beach or to try new local restaurants. He says, “We’re just a normal family that loves being around each other.”

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