Understanding cash value life insurance
The future is always uncertain, which means every source of security and consistency can be invaluable in weathering life’s changes.
Author:James PierceReviewer:Alberto ThompsonJan 14, 2022351 Shares350.6K Views
The future is always uncertain, which means every source of security and consistency can be invaluable in weathering life’s changes.
When we think of life insurance, we think of some distant unknown where our loved ones are living on happily, secured by a lump sum benefit. Enough to settle any debts and keep financial promises made during our lives. But permanent life insurance policies have an additional benefit: the ability to accumulate interest-bearing cash value that can be tapped during your lifetime.
Your cash value life insurancepolicy has the capacity to provide living benefits for various applications, regardless of all the different things you might think to use it on.
What Is A Cash Value Life Insurance Policy?
Cash value life insurance policies work toward growing interest steadily over a period of time, providing you with the ability to make withdrawals against the policy or to use the policy for different financial goals.
For example, if you purchased a cash value life insurance quote for $50,000 and need a cash injection for a sudden major life event, you can withdraw an amount of funds calculated based on your time spent with the plan and the premiums you pay toward it. That loan is taken out against your own insurance, offering an easy and low-interest way to tap your funds.
Taxes on the growth of cash value are deferred until you make a withdrawal, but at the time of a withdrawal you may encounter a penalty from your provider as well as tax implications.
On top of that, cash value life insurance usually comes with higher premium payments. That’s because only permanent life insurance accrues cash value, and permanent life insurance offers a guaranteed death benefit as long as the policy remains in effect. While most people will never see the result of a term life policy, permanent life insurance has a guaranteed payout.
What Are The Benefits Of Cash Value Life Insurance?
The benefits of permanent life insurance are multifaceted. For starters, a cash value life insurance policy provides the best living benefit of any life insurance policy, allowing you the ability to access your funds at pre-approved intervals, which includes an unlimited amount dependent on your provider. While some term policies may allow for limited access to funds with certain riders, there are likely to be numerous conditions and hoops to jump through to access any funds while you’re alive.
You can access your cash value through direct withdrawals or by taking out a loan against it. Or, if enough time has passed and money has accrued, you may be eligible to use your cash value in place of monthly premium payments, redirecting from an account you own and operate to cover its own costs.
While there are no guarantees in life, there are a number of ways to give yourself some breathing room to free yourself from the burden of financial stress. Before even looking into life insurance quotes, be sure to research how these plans can not only benefit your beneficiaries, but also give you some relief in the here and now.
James Pierce
Author
James Pierce, a Finance and Crypto expert, brings over 15 years of experience to his writing. With a Master's degree in Finance from Harvard University, James's insightful articles and research papers have earned him recognition in the industry.
His expertise spans financial markets and digital currencies, making him a trusted source for analysis and commentary. James seamlessly integrates his passion for travel into his work, providing readers with a unique perspective on global finance and the digital economy.
Outside of writing, James enjoys photography, hiking, and exploring local cuisines during his travels.
Alberto Thompson
Reviewer
Alberto Thompson is an acclaimed journalist, sports enthusiast, and economics aficionado renowned for his expertise and trustworthiness. Holding a Bachelor's degree in Journalism and Economics from Columbia University, Alberto brings over 15 years of media experience to his work, delivering insights that are both deep and accurate.
Outside of his professional pursuits, Alberto enjoys exploring the outdoors, indulging in sports, and immersing himself in literature. His dedication to providing informed perspectives and fostering meaningful discourse underscores his passion for journalism, sports, and economics. Alberto Thompson continues to make a significant impact in these fields, leaving an indelible mark through his commitment and expertise.
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