whole life living benefits

Ltc funding

Permanent life insurance may be considered a potential funding source for long-term care costs because of its cash values. Policy-owners can typically access their cash values in the following ways:

• policy loans
• partial withdrawals
• full surrender

When withdrawing money from inside the policy keep in mind that you can withdraw up to 82% of the cash value, income tax free. While keeping the policy the policy in force for the beneficiaries.

drawback

The drawback of using life insurance cash values as long-term care funding sources is that it impairs the policy’s ability to fulfill its original function—that of providing a death benefit to the insured’s heirs. Presumably, the insured’s survivors are going to need that money, or the policy wouldn’t have been purchased in the first place. However, accessing cash values has the effect of reducing the policy’s death benefit:

• If the insured dies while a policy loan is outstanding, the balance of the loan is deducted from the death benefit.
• Partial withdrawals generally reduce the policy’s death benefit by the amount of the withdrawal at the time the money is taken out.
• Full surrenders require termination of the policy and, consequently, cancellation of the death benefit. Upon full surrenders some states implement a tax on the interest growth inside the policy.
  

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