Whole life insurance is among the least known and most maligned financial products in the investment world.If you're hearing the oft-repeated refrain"buy term and invest the gap" you are likely talking to a stockbroker or an"expert" on cable tv.
Perhaps you need to change the channel.The truth is most people suck.Even investment management professionals struggle to match their benchmark indices each year.
The purpose of life insurance isn't to simply duplicate what you can do in an investment account, but to do all of the things you can not. The interest and dividend growth of the money value within a whole life insurance plan is tax-deferred.
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Only withdrawals that are greater than the amount of all premiums paid will be treated as income for taxation purposes.Among the most attractive characteristics of a complete life insurance plan is that the operator can borrow money from the policy (generally at a very attractive interest rate) without any tax implications (that is right, tax-free) and with no credit check or loan approval process provided the coverage is in force.
The borrowed funds could be repaid at any time, including in adulthood.Bear in mind, the reason to purchase whole life insurance is to give a specific quantity of money at a particular time for those people you care about most.
You simply can not get those guarantees using a brokerage account. On top of that, the eventual death benefit is obtained by a beneficiary tax-free. If the policy is owned by a trust, the funds aren't included in the estate of the deceased for tax purposes.