Do you want to take up a life insurance policy that also offers some investment opportunities? If yes, you should consider taking advantage of the Participating Whole Life Insurance policy. Under this type of policy, part of your premium goes into a mutual fund, and you can earn dividends on that money.
Moreover, Participating Whole Life Insurance policies have the potential to significantly help you reduce your taxes. Remember, though, that dividends are not guaranteed, and the value of the mutual fund could go down. No wonder you should learn to exercise caution before you finally decide to purchase Participating Whole Life Insurance policy.
Fortunately, there are different ways you can earn dividends with Participating Whole Life Insurance. This could be either as monthly payouts or you can simply use the dividends to lower the dollar amount of your future premium payments. It also allows you to reinvest your dividends with the insurer and continue earning additional interest.
Depending on your contract details, you may have several options on how you can receive dividends with the Participating Whole Life Insurance policy. Among the most common ones include premium deductions, insurer savings account, pay off a policy loan, or simply get cash payments. It pays off to understand how each one of them works before deciding on anything.
In a nutshell, you can use the premium deductions option to reduce the dollar amount of your premiums. Let’s say the annual premium you make do with is $700 and your policy earn $200 in dividends in one year. In this case, the insurance company will only charge you $500.
For cash payment, the insurer will send you a check for the annual dividend amount. Things tend to be different with the pay off a policy loan option since it allows using the policy dividends toward repaying an outstanding loan taken out against your policy.
Keep in mind it pays off to purchase Participating Whole Life Insurance when you are younger. After all, you will have many more years to grow cash value.