As UHNW clients consider their estate planning and wealth management strategies, many may be interested in exploring the benefits of whole life insurance. Whole life insurance is a type of permanent life insurance that provides a death benefit for the life of the insured, as well as a savings component that grows tax-deferred over time.
So, what is whole life insurance and how does it work?
Whole life insurance is a form of life insurance that remains in force for the insured’s entire lifetime, as long as the premiums are paid. The premiums paid for whole life insurance are typically higher than those paid for term life insurance, which provides coverage for a specific period of time. However, the premiums for whole life insurance are level and do not increase over time.
A portion of the premiums paid for whole life insurance is applied towards the policy’s cash value, which grows over time on a tax-deferred basis. The cash value can be accessed during the insured’s lifetime through policy loans or withdrawals. Any outstanding loans and withdrawals will reduce the death benefit payable to the beneficiary.
The death benefit payable under a whole life insurance policy is typically tax-free to the beneficiary, which can be an important consideration for UHNW clients. The death benefit can provide liquidity for estate planning purposes, such as paying estate taxes or funding a trust.
In addition to the death benefit and cash value accumulation, whole life insurance also offers some other benefits. For example, whole life insurance policies may include a dividend component, which can provide additional cash value growth. Some policies also offer riders, which are additional features that can be added to the policy for an additional cost. Examples of riders include a long-term care rider or a waiver of premium rider.
Overall, whole life insurance can be a valuable tool for UHNW clients who are looking for permanent life insurance coverage with a savings component. As with any financial product, it is important to consult with a qualified financial professional to determine if whole life insurance is appropriate for your individual situation and goals.
At GILKO CAPITAL, we specialize in providing personalized wealth management and estate planning services to UHNW clients. Our experienced team of advisors can help you navigate the complex world of financial planning and find the solutions that best fit your unique needs and objectives. Contact us today to learn more.
