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What is Cash Value Life Insurance?
Cash value life insurance has been available for nearly 200 years. Over time, individuals and businesses have used this type of policy to provide for their loved ones in case of death and accumulate tax-advantaged savings, pay for a college education, purchase a new home, and supplement future retirement income needs.
Cash Value Life Insurance Definition
Cash value life insurance is a type of permanent life insurance policy that offers both a death benefit and the ability to build up savings or investments. The cash in the policy can grow tax-deferred, meaning there is no tax due on the gain unless the policyholder surrenders it.
Term life insurance does not build cash value. Unlike term life insurance with an “expiration date,” cash value policies will usually remain in force, provided the premium is paid. This is the case even if the insured contracts an adverse health condition.
Is Cash Value Life Insurance a Good Investment?
While it is technically not an investment per se, cash-value life insurance can provide a long list of financial benefits and can do so in a tax-advantaged manner. For instance, because the money inside a permanent life insurance policy can grow tax-deferred, it can build exponentially and compound your money over time. Some of the wealthiest families in America, like Walt Disney, the Rockefellers, and many more, have used cash value to build fortunes.
Unlike variable investments, which come with the risk of loss due to poor market performance. Whole life or universal life insurance, there is no risk to the cash – regardless of what happens in the stock market. Because there is no loss to make up for, the cash can continue to compound over time.
Types of Cash Value Insurance Policies
Whole Life Insurance
Whole life insurance is a type of permanent coverage intended to remain in force for the insured’s entire (or whole) life. This is the most simple form of permanent life insurance. It offers a fixed death benefit and a fixed premium, and the insurance company sets the interest rate for the cash value growth.
Index Universal Life Insurance
Indexed universal life insurance has death benefit coverage and cash value components. The return on the cash is based in large part on the performance of an underlying market index, such as the S&P 500. When the index rises, a positive return is credited – some indexes even offer no “cap” or maximum amount of interest you can gain. But, if the index performs poorly, the policy’s cash value return does not incur a loss but is credited with 0% for that period.
How do I get a policy?
Are you unsure which cash value policy type is best for your financial goals? Struggling to compare the plans and choose the right policy type can be confusing and overwhelming. Let us help you choose the right policy. It all starts with an illustration which we can provide once you complete the quote from above.
Get the perfect policy for you with our expert advice today! Complete our quick quote form, and we’ll cover the rest! Our dedicated agent will guide you through the process and explain the different policies in an easy-to-understand manner.