On the surface, life insurance is a very simple concept. When someone passes away, an insurance company pays a lump sum to their beneficiaries. But with the different types of life insurance policies available, it can be difficult to determine which one is the most valuable to you and your family.
Most individuals are familiar with term life insurance. In exchange for a monthly or annual premium, term life insurance provides protection for a fixed amount of time such as 10, 20, or 30 years. After the term has passed, the policy lapses and coverage ceases.
Cash value life insurance, on the other hand, can provide coverage for an entire lifetime. This may be important if you foresee having insurable interests after you retire, would like to leave a charitable gift or inheritance, or need funds for a business buyout.
Generally speaking, cash value life insurance has higher premiums than its term counterparts. Effectively a portion of the higher premium is saved within the insurance contract to fund the cost of insuring you as you age. Cash value life insurance comes in four general forms:
Whole Life – Premiums are fixed, and cash value grows at a predetermined rate.
Universal Life – Premiums can be flexible and cash value grows at a predetermined rate.
Indexed Universal Life – Premiums can be flexible and cash value growth is determined by an underlying stock index such as the S&P 500.
Variable Life – Premiums can be flexible and cash value can be invested in select stocks, bonds, index or mutual funds.
Determining which cash value life insurance product is right for you depends on your budget, risk tolerance, and long-term goals. Regardless of which product you choose, each product offers the following valuable benefits.
Take a Loan – You may take a loan out against your policy and have the interest paid back into your cash value.
Make a Withdrawal – Partial withdrawals may be made from the cash value. If not paid back, there may be a reduction in the benefit payable, the length of coverage, or both.
Surrender the Policy – All the cash value can be withdrawn, and the policy surrendered.
Cash value life insurance policies are long-term contracts and financial commitments. Contact our office to learn more and make the right decision to meet the needs of you and your family today.