Cash Value Life Insurance- What Is It and How Can It Benefit You?

Cash value life insurance is a type of policy that has premiums that will never increase, as well as coverage that can never be canceled. The availability of cash value is another feature of this type of policy. Many people hear cash value and think it sounds nice, but you might not be sure what it really means. We will go more in depth about what cash value life insurance is to help you determine if this is the type of coverage you need.

Cash value insurance has a higher premium than term life insurance because you pay higher premiums in the earlier years. Depending on your age and situation, the premium can be as much as ten to fifteen times higher. Your premium will consist of the amount needed to insure you as well as an overpayment. This extra premium is set aside by the carrier and invested in various ways. It can be invested in vehicles such as stocks, bonds, mutual funds, or other areas, and most carriers will promise a guaranteed minimum return. Over time, this account grows and you can have a nice sum of money in your policy.

You can access the cash value in your life insurance policy in one of two ways. You can borrow it by using the death benefit as collateral. The carrier will charge you interest until you pay it back. If you don’t pay it back then the amount borrowed plus interest will be subtracted from the face amount when you die. You can also access the cash value by surrendering your policy. Keep in mind that there may be tax consequences for doing that.

The three basic types of cash value life insurance are:

Whole life insurance- This is the most basic kind of permanent coverage. You have a level premium and a guaranteed minimum cash value. Some carriers may also pay out dividends, depending on how well the company performs.

Universal life insurance- This is a more flexible type of permanent coverage because your premiums can vary. You can choose to pay more towards your policy and you can even skip a payment if you need to. The downside to this is that your policy can lapse if you don’t make enough payments or if your cash value account doesn’t perform well.

Variable life insurance- This is a riskier type of policy because you can invest your premiums. This means that if the investments do well, you will have a policy with a large cash value account and your death benefit can even grow. The downside is that if the investments perform poorly, your policy can end.

If you are considering a cash value life insurance policy, then it is a good idea to speak with an agent about your situation first to help you decide if its the right type of coverage for your family. Most people can obtain adequate coverage with a term life policy, but there are also many ways that a cash value policy can fill in some gaps.

It is best to compare multiple life insurance quotes to determine which type is most affordable for you. There is coverage available for children all the way up to age 85 life insurance.