Cash Value Life Insurance

That depends on your financial goals, budget, and unique circumstances. A cash value life insurance policy can be a good way for some families to build their savings and access cash when they need it, but they also are more expensive than standard term life insurance. Talk to an agent to help you weigh your options.

There are several ways your cash value can grow, depending on the policy type. Whole life insurance guarantees a fixed rate of return on your cash value. With universal life, the account’s growth is based on a variable interest rate. Finally, variable life insurance allows you to invest a portion of your premiums into sub-accounts, like mutual funds. Variable policies offer the greatest potential returns, but also carry higher costs and risks. The eFinancial team can help you compare whole, variable, and universal life policies to find the right fit.

Most permanent life insurance plans come with a cash value component. Your options include:

• Whole life: With whole life, your premium and death benefit won’t ever change, making it easy to fit into your budget. A portion of your premium goes into a separate cash value account that accumulates interest over your policy’s lifetime. You can withdraw the funds for any reason, or you can cash out the entire account and surrender your policy if you don’t need life insurance anymore.
• Final expense: If you’re between the ages of 50 and 85, final expense insurance is a type of whole life policy designed to cover any end-of-life needs. This is often the best cash value life insurance to help your family handle expenses after your death, including funeral costs and medical bills. 
• Universal life: Universal life insurance gives you the flexibility to adjust your premium and death benefit amounts as needed. This can help you stay covered, even if your financial situation changes. With universal life plans, the cash value of your life insurance may go up and down, but it typically earns a minimum rate of interest.
• Variable life: Variable life insurance lets you build cash value that’s invested in several sub-accounts, similar to a mutual fund. With variable life, your cash value grows or shrinks depending on the market, instead of earning a guaranteed amount of interest. This type of coverage has higher potential for growth than other permanent plans, but it also tends to be riskier and requires hands-on management.

Over the years, your policy’s cash value can eventually grow to reach the full value of your death benefit. At that time, you receive the cash value and your policy comes to an end. With many cash value plans, this is designed to happen when you turn 100. This can get a little tricky, so talk to an agent about your options.

Your cash value provides an optional benefit that you can use as needed during your lifetime. When you die, a typical whole life policy will pay out the policy’s coverage amount as a death benefit to your beneficiary. Some cash value policies may pay the death benefit plus the cash surrender value when you die, but they tend to cost more than other types of policies.

This happens when you withdraw the full cash value available in your policy. If you want the money and no longer need life insurance coverage, you can surrender your policy and receive what’s called the cash surrender value, some of which may be taxable.

Just be aware that if you surrender your policy within the first few years, the fees you have to pay may cost more than the value you’re taking out. You also won’t have life insurance coverage any longer, so make sure you have a plan in place.

It typically takes a few years to accumulate cash value in your life insurance policy. Once your cash value account grows to a certain level, you can take out a loan or cash out the policy if you don’t need life insurance anymore. In some cases, you can also use the cash value in your policy to pay for your premiums.