Participating Whole Life Insurance: A Guide for Accountants

When clients need financial assistance, you, the accountant, are frequently their first point of call. Life insurance, and more especially Participating Whole Life Insurance, may come up in conversations. This kind of insurance is a strong financial tool that can offer both growth and protection, making it a great suggestion for your most affluent clients.

What is Participating Whole Life Insurance?

Participating Whole Life Insurance is a type of permanent life insurance that provides both a death benefit and a cash value component. Whole life is not like term insurance where there is an expiration date. Permanent insurance contracts stay with your client until the insured's death as long as the policy is funded correctly.

The ability of the policy to receive dividends is referred to as the "participating" feature. There is also policies that are considered "non-participating" which also pay dividends. Although not guaranteed, these dividends can be used to pay for extra insurance, lower future premiums, or build up inside the policy, raising the cash value and death benefit.

How Does Participating Whole Life Insurance Work?

Part of the premiums that a customer pays for a Participating Whole Life Insurance policy goes towards the insurance cost, while the other part is deposited into a cash value account. The policyholder can access the cash value anytime during their life as its value increases. Accessing the cash may or may not have a taxable consequence. Many clients may want to access it for retirement funds or reinvesting back into their business at a later time.

The dividend rate or how much your dividend is can vary depending on the insurance company's ability to be profitable. Each company has a different approach for long term gains, so the dividend can be effected by which company the policy is placed with. However, if you examine insurance companies dividend scale, you will see how stable these returns can be. Insurance companies have been around for 100's years and plan to be for hundreds more.

The Role of Dividends in the Growth of the Policy

Different things can be done using dividends. Because of this flexibility, consumers can modify their policy to meet evolving financial needs and objectives. The flexibility and stability of these dividends can form a core component of a client's overall estate planning and wealth strategy.

Why Accountants Should Not Be Afraid of Participating Whole Life Insurance

As an accountant, applauding Participating Whole Life Insurance to your clients can give them a diverse financial tool that offers both protection and growth. No matter when your clients pass away, the everlasting coverage ensures their loved ones will get a death benefit. The cash value component is a tax-advantaged savings vehicle that can be used for retirement income, education expenses, business prospects, or any other financial necessity. Dividend paying policies have the potential to increase these advantages by offering additional growth and flexibility.

Participating Whole Life Insurance is more than just a life insurance policy. It's a strong financial instrument that can help your clients safeguard their loved ones, develop their wealth, and achieve their financial goals. Understanding this product and its benefits as an accountant can allow you to provide helpful advice to your clients and assist them in making informed decisions regarding their financial future.