A 20 pay whole life insurance policy is one where 20 annual payments are made to the life insurance company, and your policy covers you your entire life. Your payments will be the same every year for 20 years, but the interest on the principal continues to grow. You’ve also got a cash investment with whole life insurance.
How Does 20 Pay Whole Life Insurance Work?
When you purchase a 20 pay whole life insurance policy, you’re agreeing to pay a higher, but still predictable premium for the next 20 years — making it a great way to avoid having to make payments once you’ve retired. The policy offers guaranteed coverage for your whole life unless loan amounts exceed the stated value in your contract. Check with your insurance agent if you’re unsure about the loan amounts allowed under your policy.
Whole life policies allow for loans and withdrawals over the lifetime of the insured. This makes it an investment vehicle, not just an insurance policy. The money grows tax-deferred, meaning there aren’t any taxes to pay unless money is withdrawn, at which time you’d pay income tax on the amount you took a payment.
A 20 pay whole life insurance policy lets you invest while you’re working and stop after 20 years. It has the great savings component of whole life insurance while insuring you for the rest of your life. Ask your financial advisor if a 20 pay whole life policy might be a good investment for you.