Whole Life Insurance as a Financial Asset

Transcription

1 An Overview Guide for Individuals Whole Life Insurance as a Financial Asset Insurance Strategies

2 Contents 1 Whole Life Insurance: A Versatile Financial Asset 2 Long-Term Value 4 Addressing Different Financial Needs Over Your Lifetime 5 Helping You Prepare for Life s Challenges We build our financial lives over time by acquiring various types of assets. These include homes and cars and financial assets such as bank accounts, investments and retirement accounts. The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. The decision to purchase life insurance should be based upon long-term financial goals and the need for death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. While the policy allows for loans, you should know that there may be little to no cash value available for loans in the policy s early years. NOT A BANK OR CREDIT UNION DEPOSIT OR OBLIGATION NOT FDIC OR NCUA-INSURED NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT GUARANTEED BY ANY BANK OR CREDIT UNION

3 Whole Life Insurance: A Versatile Financial Asset It is important to consider how the different types of assets that you own will help you address your financial needs today and as they change over time. As an example, most people purchase their home because they need a place to live. However, later in life they may use the equity in their home for other purposes, such as helping to pay for their children s education or to provide additional funds for their retirement. Similarly, many people buy life insurance to provide financial security for their family or business during their working years. However, their life insurance may help them address other financial needs, such as providing cash for emergencies, preparing for retirement or ensuring that they leave a financial legacy for the next generation. Consider Whole Life Insurance as Part of Your Overall Financial Strategy Investments Real estate Whole life insurance offers a combination of death benefit protection, cash value accumulation, guarantees and income tax advantages that differentiate it from most other types of financial products. A whole life insurance policy can be a versatile financial asset that may help you address different financial needs during various stages of your life. Retirement accounts Whole life insurance Business interests 1

4 Long-Term Value Participating whole life insurance from Massachusetts Mutual Life Insurance Company (MassMutual) offers valuable features and benefits that provide long-term value to policyowners. These include: Guarantees Whole life insurance provides three fundamental guarantees: A guaranteed amount of life insurance; Guaranteed level premiums and premium payment period; and Guaranteed increases in cash value. Permanent life insurance protection Whole life is designed to provide coverage over the insured s entire lifetime. Cash value The policy accumulates guaranteed cash value over time, which increases each year and will never decline in value due to changes in the financial markets. Policy dividends MassMutual s participating whole life policyowners are eligible to receive annual policy dividends. Dividends are not guaranteed. However, MassMutual has paid policy dividends consistently since the 1860s. Policyowners may use the dividends that they receive to pay some or all of their out-of-pocket premiums or purchase additional life insurance. The majority of MassMutual s policyowners use their dividend payments to purchase paid-up additional whole life insurance, also called paid-up additions. This increases both their life insurance coverage and cash value over time. Whole Life Policy With Paid-Up Additions Paid-Up Additions Purchased by Dividends 1 Total Life Insurance Protection Guaranteed Amount of Life Insurance Age at Issue Age Dividends are not guaranteed. 2

5 Income tax advantages Whole life insurance policies also offer a combination of valuable income tax advantages that include: An income tax-free death benefit The death proceeds of a whole life policy are generally received income tax-free by the beneficiaries. Tax-deferred cash value growth Policy cash values, including the cash value of any paid-up additions, accumulate on a tax-deferred basis. Tax-advantaged distributions 2 Policy dividends 1 and any partial surrenders of cash value are received as a return of cost basis first and gain last. This means that policyowners will not pay taxes on these distributions until they exceed their total out-of-pocket premiums. In addition, borrowing from the policy will not result in taxable income as long as the loan is repaid with out-of-pocket payments while the policy is in force, or it is repaid from the policy proceeds at death. Whole life insurance offers a combination of permanent life insurance protection, cash value accumulation, guarantees and income tax advantages that provide dependable, long-term value. 2 Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty. Access to cash values through borrowing or partial surrenders will reduce the policy s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. 3

6 Addressing Different Financial Needs Over Your Lifetime Consider some of the ways that a MassMutual whole life policy might help you meet different financial needs and achieve your long-term financial goals: Protect your value as a provider It is important to have both the right amount and the right type of life insurance in order to protect the financial security of your family or business. A whole life policy can help meet your life insurance protection needs today, and as they change over time. Whole life as a source of cash or credit The cash value that your policy accumulates can be an additional financial resource during a time of need. If you have accumulated paid-up additions, they may be surrendered for their cash value as needed, and you may borrow against your policy s cash value at any time and for any reason 2. The value of life insurance during retirement People often assume that their need for life insurance ends when they stop working. However, a whole life policy can provide additional financial security for your spouse during retirement. This may allow you to use your other retirement assets more effectively and enjoy a more secure and comfortable retirement. Whole life insurance as a source of supplemental retirement income Your MassMutual whole life insurance policy may be an effective way to accumulate additional funds for retirement because it offers: A systematic and disciplined approach to accumulating funds; Stable and consistent cash value growth that is not impacted by changes in the financial markets; Tax advantages; and Flexibility. Whole life as part of your wealth transfer strategy If leaving a financial legacy is important to you, life insurance offers one of the most effective ways to transfer wealth to your family. The death benefit will be paid income tax free to the policy beneficiaries, and will avoid the expenses and delays of the probate process. People often assume that their need for life insurance ends when they stop working. However, a whole life insurance policy can provide additional financial security for your spouse during retirement. 4

7 Helping You Prepare for Life s Challenges You and your family will face different financial challenges over the course of your lifetime. Whole life insurance from MassMutual can help you be prepared for whatever life brings. Purchasing a policy that will meet your needs Your ability to use your whole life policy to help meet different financial needs over time will depend upon a number of different factors that include: How much and what type of whole life policy you purchase; How long you pay premiums out-of-pocket; The amount of future dividends 1 and how they are used; and The amount of any distributions that you take from the policy, such as partial surrenders or policy loans 2. Ask your financial professional for a whole life illustration based on your specific situation. 5

8 MassMutual. We ll help you get there. There are many reasons to choose a life insurance company to help meet your financial needs: protection for your family or business, products to provide supplemental income and the confidence of knowing you will be prepared for the future. At Massachusetts Mutual Life Insurance Company (MassMutual), we operate for the benefit of our participating policyowners. We stand strong in the fundamental belief that every secure future begins with a good decision. And when choosing a life insurance company ownership, strength and stability matter. Learn more at The Whole Life Legacy Series (WL-2007 and WL-NC-2007) are level-premium, participating, permanent life insurance policies issued by Massachusetts Mutual Life Insurance Company, Springfield, MA Massachusetts Mutual Life Insurance Company, Springfield, MA All rights reserved. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. LI CRN