Many Americans opt for permanent life insurance policies because they offer coverage for their entire lifespan and include valuable benefits, like cash value retention. If you didn’t know this, you’d be surprised to learn that permanent life policies, like whole and universal life, all build up a cash value that can be withdrawn, borrowed, or used in other ways. Though, if you die, you may be unable to utilize this valuable benefit fully.
What is Life Insurance Cash Value?
The cash value component of your life insurance policy consists of a portion of your premium payments that has been placed into an interest-bearing account. Usually, this account grows tax-deferred at a rate that is guaranteed by the insurance carrier. Though some permanent life insurance policies offer different ways to grow the cash value of your policy.
How Can Cash Value be Used?
You have a range of options for how you can use the cash value of your insurance policy. Some people choose to take a loan out from their cash value account. Others opt to completely surrender the policy to obtain its cash value in a cash payment. In some instances, it may also be possible to use your cash value to pay your life insurance premiums or increase your death benefit.
What if You Die Before Withdrawing Your Cash Value?
What happens to your cash value when you die depends on the type of permanent life insurance policy you have. Here is what to expect:
- Whole life insurance – If any cash value remains in your policy when you die, the money is forfeited to the insurer.
- Universal life insurance – You may have the option to add your cash value to the death benefit that your beneficiaries will receive when you die.
Should You Get Insurance with Cash Value?
Having cash value to rely on in your times of need can prove essential for some. Yet, permanent life insurance policies do have the drawback that they tend to be more expensive. If you are concerned about whether or not you should get a plan with cash value, you should consider speaking to the talented insurance professionals at All Things Insurance.
We can help you get quotes on qualifying plans, then guide you through the process of selecting one that suits your needs. To get a free quote, call us now.