Whole life policies or permanent policies are meant to protect you for your entire life. However there are a few moving parts in a life insurance policy that can actually make it pay out once the insured person reaches 95 or older.
Cash Values, Explained
You may have heard of something called cash value and cash value surrender, if you have a whole life insurance policy. They represent helpful resources for policyholders throughout their lifetime. A policyholder can take a loan out against their cash value when they have unexpected situations come up. Additionally, they can access the funds to supplement their retirement savings. Since a cash value loan isn’t a gift or profit, it’s not taxed. However it does need to be repaid along with the interest it accrues. If the policy holder doesn’t repay the loan during his or her lifetime, then the amount owed may be taken out of the death benefit.
Now you may be wondering what all this has to do with the policy maturity. To explain, the cash surrender value is the amount of the policy an individual can take if they choose to surrender or cancel it. Usually, there is a fee attached to this amount and it’s less than the cash value. The cash value, surrender value, and death benefit will be equal when a whole life insurance policy reaches maturity at a predetermined age within the policy.
Usually whole life insurance policies are expected to mature around 95 or older. Once it has reached maturity, the policyholder is given the right to the full cash value. At this point, a death benefit will no longer be issued and there will be no more premiums paid. A later maturity date might be preferred due to the fact that the payout of the cash values could be taxed.
Whole life insurance policies aren’t something most people will have to be concerned with considering maturity usually exceeds life expectancy. However, it’s good to have some information on it, just in case. If you’re ready to begin shopping for a Chicago life insurance policy and need assistance, give us a call at 630-442-0282.