You’ve been shopping around for a life insurance policy but are feeling overwhelmed by the amount of information you need to take in to make your decision. Perhaps you came across cash value life insurance and are wondering what this type of policy entails. Just like any other form of life insurance, whether it be term life insurance or another, there are pros and cons to every policy. What might work well for one individual won’t for another and so it’s important to understand what exactly it is that you can expect from each specific type. Here, we will describe the ins and outs of cash value life insurance and explain some of the benefits and drawbacks.
When you purchase a policy with a cash value, you can expect that your beneficiaries will be paid a death benefit upon your death, as well as a cash value. What’s a cash value, you ask? With this type of policy, a portion of the premiums you pay will go to cover the death benefit and the other portion will be invested in order to build a ‘cash value’ for the policy. For many people, the reason they choose this type of policy is that they can use the cash value as a tax sheltered investment. You can use this cash value as a source of money from which you can borrow if needed, or as a way to pay for your insurance premiums later in life. Unlike term life insurance which only covers a person for the term that they chose, cash value insurance policies provide permanent coverage and come in the form of universal, variable or whole life insurance.
Sounds good, doesn’t it? There are many upsides to this type of policy but, just like any type of life insurance, there are some downsides as well. For instance, the insurance holder does not have any control over the investments that are made with the cash value, and so some will argue that an individual could make more money if they were to invest the money themselves. One other drawback for this type of life insurance is that it’s more expensive than term life policies. You’re not only paying to receive insurance coverage for the duration of your life, but you’re also paying to have the cash value.
To learn more about cash value policies, contact one of our licensed agents at TermLife-Insurance.com.