A Guide to Whole Life Insurance Cash Value

Summary: Whole life insurance offers seniors not only a death benefit but also a growing cash value that can provide financial security and flexibility in retirement. Learn how this powerful financial tool can support unexpected expenses, leave a legacy and help offer peace of mind for you and your loved ones.

In this article:

What is cash value life insurance?
How does whole life insurance cash value work?
Accessing cash value in your whole life policy
Why seniors should consider whole life insurance with cash value
Secure your financial future with Mutual of Omaha
Seniors, step into financial confidence today
Frequently asked questions (FAQs)

As we age, one question often arises: How will our loved ones manage without us when we’re gone? You might have considered not wanting to leave them with financial burdens during an already emotional time. Whole life insurance is a type of permanent life insurance coverage that helps provide some peace of mind, knowing your family will be supported. With this life insurance coverage, you can rest easy knowing that your loved ones won’t be burdened with financial worries during an already emotional time.

For adults over 50, it offers more than just a death benefit. It can act as a valuable financial tool that supplements retirement income and covers unexpected expenses. In this article, we’ll explain how whole life insurance works, how its cash value grows, and how you can access it when most needed.

What is cash value life insurance?

A whole life insurance policy lasts your entire life and includes a growing cash value component. Whole life insurance is a type of permanent insurance that provides lifelong coverage, with part of the premiums building up tax-deferred cash value. This cash value can be accessed later to help cover unexpected expenses. It can be a big help for seniors in managing their retirement savings because taxes on the growth are not due until you withdraw money or borrow against it.

What’s more, your premium helps build cash value while also covering insurance costs. Over time, your policy may even earn dividends, further boosting the cash value. As you accumulate cash, it can provide a financial safety net for unexpected expenses, like medical bills or home repairs, and can help cover final expenses.

How does whole life insurance cash value work?

When you first begin a whole life insurance policy, a portion of each premium payment is set aside to build the cash value. This growing cash value is the savings component of the policy. It not only accumulates over time but also provides you with a financial safety net for unexpected expenses. Here’s how the process works:

Initial premium payments:

At the start, a smaller portion of your premium contributes to cash value while the rest covers the insurance cost.

Growth over time:

Over time, as you continue making premium payments, the cash value component increases. This growth is steady but can be slow in the early years. As the policy develops, it accumulates cash at a guaranteed rate set by the insurer.

Death benefit vs. cash value:

The death benefit is the fixed amount that your beneficiaries will receive when the time comes.
The cash value is the growing fund that you can access during your lifetime.

As the policy develops, the cash value keeps increasing, often at a guaranteed rate set by the insurer. Companies like Mutual of Omaha design their policies to enhance cash value over time, offering important financial flexibility.

Interest and dividends

The cash value grows not only from your premiums but also from interest and, in some cases, dividends. Here's how:

Interest: Insurance companies invest the funds you’ve paid in premiums and share the returns with you in the form of interest. This interest helps accumulate cash over time.

Dividends: If your insurer offers dividends, you may receive a portion of the company’s profits. While dividends aren’t guaranteed, some companies pay them regularly. These dividends can be added to your cash value, further boosting your fund over time.

When borrowing from or withdrawing against the cash value, it’s important to consider how these actions may affect your policy’s performance and the benefits for your beneficiaries.

Accessing cash value in your whole life policy

Knowing how to access your cash value can go a long way, whether it’s to cover unexpected medical expenses or supplement retirement income.

How to tap into your policy’s cash value

Policy loans

With a policy loan, you borrow money from the cash value of your policy. This loan is typically offered at a low interest rate, and you don’t need to undergo a credit check.

To request a loan, you’ll need to contact your insurer (i.e., Mutual of Omaha) and fill out a simple request form. The insurer will let you know the terms, such as the interest rate and repayment schedule.

Example: Megan, a retired teacher, takes a policy loan to pay for unexpected home repairs after a storm. By borrowing from her policy, she avoids dipping into her savings and can continue supporting her family without worrying about interest rates from traditional loans.

Withdrawals

A withdrawal allows you to withdraw money directly from your policy’s cash value, rather than borrowing against it. Keep in mind that while this reduces the cash value, you’re not required to pay interest.

To initiate a withdrawal, contact your insurer to discuss the amount you’d like to withdraw and any possible effects on your policy.

Example: A parent saving for her child's college tuition can withdraw money, a portion of her policy’s cash value, to help cover the cost. This gives her the financial support she needs without taking out a loan.

Timing is everything

Knowing when to access your cash value is key to ensuring your policy continues to meet your needs without jeopardizing your long-term wealth management goals. The best scenarios include the following:

Medical expenses: Unexpected health issues can be costly. If you face an emergency or ongoing medical expenses, your cash value can serve as a cushion.

Retirement income: Many seniors use the cash value to supplement their retirement income, giving them more flexibility to cover daily living costs.

Funeral costs: With the average funeral cost rising, your cash value can also be a way to cover your funeral services, so your family doesn’t face the burden.

However, it’s important to be mindful of how much cash value you access and when. Taking too much too early can leave your policy underfunded and reduce the death benefit for your loved ones.

Why seniors should consider whole life insurance with cash value

It’s clear that permanent life insurance, such as whole life insurance, offers seniors a unique opportunity to protect their family’s future while providing fiscal independence in retirement. While others, such as variable universal life, can also build cash value, they carry more risk due to market fluctuations.

Whole life insurance, on the other hand, provides a more stable, guaranteed cash value growth over time. Having reliable life insurance coverage ensures that you have both protection for your loved ones and financial flexibility for your own needs. Here’s why:

Protect loved ones

Whole life insurance coverage offers a solution by providing a death benefit to support your family. What if you could take care of funeral expenses in advance, so your family doesn’t have to? Whole life insurance’s cash value can help alleviate that burden.

Financial flexibility in retirement

The cash value acts as a financial cushion, helping retirees cover unexpected expenses, such as medical bills or long-term care. It also complements other retirement planning strategies, offering a reliable source of growing funds.

Peace of mind

With whole life insurance, people approaching or in retirement gain emotional comfort knowing they have a safety net. This security lets you focus on enjoying life, without worrying about leaving extra stress for your family. Whole life insurance with cash value helps create a secure future for both you and your loved ones.

Secure your financial future with Mutual of Omaha

United of Omaha has built a solid reputation for offering reliable and trustworthy whole life insurance policies. Choosing a policy that offers not only protection for your loved ones but also a monetary backup can make all the difference.

United of Omaha’s whole life insurance is designed with seniors in mind, offering valuable benefits that make it a top choice. If you want to find the perfect life insurance policy, it's essential to think about your budget and financial goals. To make your decision easier, we've designed a simple comparison chart for you.

Why Mutual of Omaha?

Affordable and reliable coverage

Mutual of Omaha offers whole life insurance policies underwritten by United of Omaha, tailored specifically for seniors, combining affordability with dependable coverage. These policies

feature reasonable premiums, enabling seniors to secure the protection they need without straining their retirement income. Each policy also builds guaranteed cash value over time and provides a steadily growing financial cushion.

No medical exams for easy access

A standout benefit is that many of United of Omaha's whole-life policies do not require medical exams. This makes them more accessible to seniors who may have difficulty with traditional health assessments. This streamlined application process ensures you can get the coverage you deserve without added stress.

Flexible payment plans for seniors

Mutual of Omaha also offers flexible payment options. Seniors can choose from different plans that best fit their unique financial situation, whether paying premiums monthly or annually. This flexibility makes it easier to maintain the policy and provides some peace of mind knowing that your coverage will remain intact.

Helpful tools for planning ahead

Plus, Mutual of Omaha provides a helpful Final Expenses Calculator, which allows you to estimate the costs of your final expenses. This tool can give you clarity and assist you in planning ahead to make sure that you have the coverage you need, giving you confidence in your financial future.

Easy access to cash value with Mutual of Omaha

One of the greatest advantages of United of Omaha’s whole life insurance is how easily seniors can access the cash value. With a simple process to request policy loans or withdrawals, those aged 45-85 (50-75 in NY) can get funds when they need them most. Mutual of Omaha offers excellent customer service and easy-to-access resources to help you navigate your options. Our team is ready to discuss your options and help you make the best decision for your needs.

Step into financial confidence today

Understanding the whole life policy cash value is an important step in securing your financial future. For older adults, this unique feature not only guarantees a death benefit for your loved ones but also provides a flexible source of funds during your lifetime.

How would it feel knowing you had the financial flexibility to cover unexpected medical bills, supplement your retirement, or even plan for final expenses? The cash value of your policy can make that a reality. Mutual of Omaha is dedicated to helping you protect what matters most, providing the strength and support you need to secure your future.

Ready to take control of your financial security? Reach out to Mutual of Omaha to get a whole life insurance quote today and start building a stronger, more secure future.

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Frequently asked questions (FAQs)

What’s the difference between whole life insurance and term life insurance?

Whole life insurance provides lifelong coverage with a guaranteed death benefit and cash value accumulation, while term life insurance covers you for a set number of years and does not build cash value.

What are the different types of whole life insurance?

Whole life insurance is just one of many types of life insurance. Other options include traditional, universal, and variable options. Traditional whole life offers fixed premiums and guaranteed cash value, while universal life provides flexibility in premiums and death benefits. Variable universal life insurance allows investment in securities, offering the potential for higher returns but more risk. Choose the one that aligns with your financial goals.

Can I use the cash value of my whole life insurance for anything other than medical expenses or funeral costs?

Yes, the cash value of your whole life insurance can be used for a variety of purposes beyond just medical expenses or funeral costs. It can help cover unexpected expenses, such as home repairs, debt payments, or emergencies. Many seniors also use it to supplement their retirement income.

How much will my whole life insurance premiums increase as I age?

Whole life insurance premiums typically remain level throughout the life of the policy, so they won't increase as you age.

What happens if I don’t repay a policy loan taken against my whole life insurance?

If you don't repay the loan, the outstanding balance will be deducted from your death benefit, which reduces the amount of money your beneficiaries will receive.

Insurance products and services are offered by Mutual of Omaha Insurance Company or one of its affiliates.
Registered Representatives offer securities and Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC.
Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.