This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial professional to understand what life insurance products are available for sale.
1 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
2 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial professional and refer to your individual whole life policy illustration for more information.
3 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
4 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.
5 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse.
6 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.
7 Riders may incur an additional cost or premium. Riders may not be available in all states.
8 A Waiver of Premium rider waives the obligation for the policyholder to pay further premiums should he or she become totally disabled continuously for at least six months. This rider will incur an additional cost. See policy contract for additional details and requirements.
9 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
FAQs
You can expect your life insurance policy to contain the details of the plan you purchased, the death benefit amount, your premium, and other key details like policy number, issue date and the name of the insured and beneficiaries. It's important to note the policy owner may not be the same person as the insured.
How do you understand your life insurance policy? ›
Benefit amount - Sometimes also referred to as the "face amount," this is the dollar amount that will be paid if you die. Premium amount - How much is owed to the insurer per month or per year for life insurance coverage. Policy issue date - When the life insurance contract was issued.
How do I know how much is in my life insurance policy? ›
The value of the policy typically refers to the death benefit. The death benefit is the amount that is paid out to your beneficiary when you die. The easiest way to determine the value is to contact the company that issued it. They should be able to tell you immediately what the value of your policy is.
What is the cash value of a $10,000 life insurance policy? ›
The $10,000 refers to the face value of the policy, otherwise known as the death benefit, and does not represent the cash value of life insurance policy. A $10,000 term life insurance policy has no cash value.
What do the numbers on your insurance policy mean? ›
The first number on your car insurance policy represents the “bodily injury per person” that your carrier will pay out if you are in an at-fault accident. So, for example, if you own a 25/50/15 policy the “25” means that your carrier will pay out up to $25,000 for each person injured in an accident that was your fault.
How long do you have to pay life insurance before it pays out? ›
How term life insurance works: The basics. A term life insurance policy is the simplest, purest form of life insurance : You pay a premium for a period of time – typically between 10 and 30 years – and if you die during that time a cash benefit is paid to your family (or anyone else you name as your beneficiary).
How do you explain insurance for dummies? ›
Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursem*nt against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.
How does life insurance work after death? ›
The death benefit, for a personal policy, is often used by surviving family members to help cover funeral expenses, pay off debts and help replace lost income. Depending on how the policy was set up, the funds may also help pay for a dependent's education and other legacy planning priorities specified in their trust.
Can you cash out life insurance before death? ›
Permanent life insurance, such as universal and whole life policies, comes with a death benefit and a cash value account that you may can cash out while you're still living.
How long does it take for whole life insurance to build cash value? ›
Cash value: In most cases, the cash value portion of a life insurance policy doesn't begin to accrue until 2-5 years have passed. Once cash value begins to build, it becomes available to you according to your policy's guidelines.
Life insurance policies at a glance
Many insurance companies include a cover page with the policy that contains the following: Name of the insuring company. Type of plan (for example: term, whole life or universal) Terms of the policy's free-look period (during which the owner can cancel a new policy without penalty)
How do you know if you are the beneficiary of a life insurance policy? ›
The easiest way to learn if you are a life insurance beneficiary is to talk to the policyholder if they are still alive. They can tell you whether you're a beneficiary and provide information necessary to claim the death benefit when they pass away.
How do you know if you can take money out of your life insurance? ›
If you have a permanent life insurance policy that has accumulated cash value, then yes, you can take cash out before your death.
How do I know if my life insurance is term or whole? ›
Key Takeaways
Term coverage only protects you for a limited number of years, while whole life provides lifelong protection—as long as you keep up with the premium payments. Term life is just insurance, whereas whole life adds a cash value component that you can tap during your lifetime.
