Participating Life Insurance
Are you in the process of estate planning and are looking into participating whole life insurance plans? At this point, you may know that you want to purchase permanent life insurance over term life insurance. With participating life insurance, you are covered for the rest of your life and is a type of permanent coverage that has profit-sharing opportunities. No matter your stage of life, we will match a participating policy with your goals and values.
Frequently Asked Questions
What is Participating Life Insurance?
Participating whole life insurance (sometimes called par life insurance) is lifelong coverage that will pay your beneficiaries a tax-free payment when you die, like a regular life insurance policy. The difference with this type of policy is it is guaranteed to grow in cash value as long as you pay your participating policy premiums. Cash value is the value of your participating insurance policy that you can access as cash. However, once you access your cash value, your insurance payout will decrease.
Your participating whole life payments are pooled into a separate account called a participating account with other policy owners. All funds are professionally managed and have the opportunity of providing you with dividends.
What is Non-Participating Whole Life Insurance?
The difference between participating and non-participating life insurance is the option for dividend payments. While participating life insurance has the opportunity of providing you with dividends, that is not an option in non-participating whole life insurance.
How does participating whole life insurance work?
There are a range of options for a participating life insurance policy, but most plans work the same way.
1. Paying your premiums will increase your participating policy’s cash value, which is tax-free
2. Payments go into the participating account that is professionally managed
3. Funds inside the participating policy account are typically used to pay for expenses, taxes, insurance claims, and other items
4. Dividends are distributed based on the participating account’s performance
5. Dividends can be used as cash, to buy more insurance, or to pay for your existing coverage
6. Beneficiaries receive tax-free payments when you die
Every insurance company will have its nuances when it comes to its participating life insurance policies. For example, some par life insurance policies have:
7. Quicker cash values
8. Quicker paid-up contract options (such as 10, 15, or 20 years)
9. Payments until death or age 100
10. Flexibility to access cash values while alive in the event of financial emergencies or opportunities
Plan for the Future
Using participating life insurance can be a very efficient way to plan for long-term estate planning needs. If you are interested in this type of life insurance, contact one of our Wealth Strategists today.