Learn the Basics of Cash Value Life Insurance

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 life insurance has a much larger premium than a term insurance policy because it is permanent coverage that will last you for the rest of your life. Based on your age and the amount of insurance you need, the premium could very well be up to ten times higher than a term policy. That’s because your premium goes toward insuring your life as well as investment portion that makes up your cash value account. This investment portion is set aside and put into various places like stocks, bonds, or other funds, and most companies guarantee a minimum return. As you make your premium payments, your cash value should continue to grow.

The cash value in your policy can be accessed in a couple of ways.The first way is by borrowing the cash value against your policy. You will be charged interest on the amount that you borrow. The borrowed amount plus interest would be subtracted from the death benefit if you do not pay it back. You may also get the cash value if you choose to surrender your policy. This usually has some type of tax consequences as well.

The three basic types of cash value life insurance are:

Whole Life Insurance: This is the basic permanent life insurance. The premium is level for life and there is a minimum guaranteed return on the cash value. You may also receive dividends, depending on which carrier you choose, and if they perform well.

Universal Life Insurance: This permanent coverage has more flexibility than other types because your premium is not fixed. You can pay more towards your policy if you want or you can skip some payments. The consequence is that your policy might lapse if enough premiums aren’t received or if your cash value account doesn’t grow.

Variable Life: This type of policy has more risk because you have the option of investing your premium payments. If your investments grow, then the cash value in your policy will also grown. On the other end, if your investment choices are poor, then your policy can lapse.

If you are thinking about getting a policy with cash value growth, then be sure to speak with an experienced agent to determine which type of insurance coverage is best for you. While most experts would recommend term life insurance because of its affordability, there are plenty of situations where a cash value policy is a great idea.

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.