Whole life insurance (or also called as endless life insurance) provides coverage benefit for the whole life of the insured. i.e. Until you’re alive. In addition to furnishing a death benefit, whole life also contains a savings element where cash value may accumulate over a period of time from the purchase date of the policy.

The whole life insurance guarantees a payment of death benefit to heirs/beneficiaries in exchange for fixed amount, regularly payments. The policy has a cash value also called the savings, along with the death benefit. In the savings element, interest may accumulate on a tax-deferred basis.

Growth in the cash value is an attractive element of whole lifeinsurance.

Whole Life Cash Value to generate cash value, a policyholder can remit payments further than the stated premiums. Also, the dividends can be reinvested into the cash value to earn interest or increase the coverage. The policy holder can take the advantage of the cash value against a living benefit paid to himself. The cash value serves as a source of equity for the policyholder and could be used as a collateral as and when required. The cash reserves in the policy can be withdrawan or a collateral loan can be applied against it. The loan is subject to an interest rate which varies from one insurer to the other. Also, the proprietor may withdraw cash value up to the value of total premiums paid tax-free. If loans are unpaid they would reduce the death benefit by the amount which is outstanding. Death benefit isn’t affected with these withdrawals, its only the cash value which gets affected.

The death benefit of a whole life insurance policy is the amount which was selected at the time of contracting. The whole life insurance policies are also eligible for payments of dividends as and when occured and disclosed by the company. In this case, the policyholder would have to handpick the option of increasing the death benefit. Alternately, unpaid outstanding loans taken against the cash value will reduce the death benefit. Almost all insurers offer riders that secure the death benefit in the event the insured becomes impaired or disabled or becomes critically or terminally ill or is not able to pay the premiums. The most common riders offered are an accidental death benefit and waiver of premium.

The money received by the heirs/beneficiaries against the death benefit does not gets added to their gross income. Still, its the owners decision as to how the policy funds would be distributed to the beneficiaries, whether a lump sum or in series of payments. Interest earned on the benefit will be taxable and should be reported by the beneficiary. Also, if the insurance policy was sold before the death of the proprietor, there may be taxes levied on the proceeds from that sale.