One of the reasons many people justify forgoing life insurance is because they need money now or in the near future. While there is some validity to this argument for term life insurance which does not have an included cash value, permanent life insurance or Cash Value Life Insurance does. With Cash Value Life Insurance, your policy is able to increase in value and you may even be able to use that value while you’re still alive making it ideal for many people.
What is Cash Value Life Insurance?
Often referred to as permanent life insurance, Cash Value Life Insurance differs from other insurance types because some of your premium fees go towards a cash value. When you pay on your premium, a portion of your fee goes to the death benefit, another to cover the insurance company’s costs and a third goes to your cash value.
How Does Cash Value Life Insurance Accumulate Value? The answer to this will depend on several factors of your policy but, generally, your insurance company will invest this money for you in an investment with minimal risk and moderate yield. Because more of your premium goes towards the cash value in the beginning, your policy’s cash amount will increase more rapidly at first then slow as more of your payment goes towards the actual premium value.
Benefits of Cash Value Life Insurance
Permanent life insurance is designed to help you meet financial goals now and, in the future, while also helping your loved ones after you’re gone. Along with giving you this flexibility, permanent life insurance also has these benefits:
- Tax Advantages: Not only can your policy grow without incurring income tax fees, it also will not cost your loved ones when it is paid out. Additionally, you can use the value while you’re still alive as long as you keep the policy current.
- Premium Rider: With some policies you can add a premium rider which stipulates that if you are disabled and unable to pay your premium, your insurance company will pay part or even all of your premium depending on the terms of your rider.
- Creditor Protection: While not available in all states, some states will give cash value life insurance policy holders special protections against creditors attempting to stake a claim on the death benefit amount. This protection is in place to help secure the policy’s value for children and spouses left behind even when creditors are owed.
- College Aid: A life insurance policy can be a good investment since the value of a policy is not considered when one applies for college financial aid.
Choosing Your Cash Value Life Insurance
Permanent life insurance comes in the form of Whole, Universal and Variable policies with each having its own advantages, drawbacks and ways to accumulate cash value. Navigating to decide which is right for you can be difficult. At Arbor Creek Financial we take the guesswork out of choosing your policy with our knowledgeable agents ready to help you get the ideal policy to meet your needs. To speak with an expert, contact Arbor Creek today!