When looking for life insurance the question many people have is should they opt for cash value life insurance? How can you know if this is the right option for you? Well, if you do some careful analysis before deciding upon the type of insurance you will have, you will know exactly if this is the right option for you.
The majority of insurers offer people the possibility to opt between permanent and term life insurance. This means that people will decide what option they prefer according to the period they want the policy to last. But no matter what option they prefer, they will also have to state if they want cash value life insurance.
Many people do not know what cash value life insurance exactly is. It is a type of insurance similar to an investment, and it gains value during the life of the policy. It will be paid only when the policyholder will die. This type of insurance is different from the other ones, because it does not cover a certain period.
What types of insurance have a cash value?
This is one of the most frequent questions when it comes to life insurance cash. It is important people to know that it is one of the components of permanent life insurance policies, like indexed universal life insurance, variable life insurance and whole life insurance. The difference between term policies and permanent ones is that the first category has a death benefit and it ends after a certain period of time.
What can I do with the cash?
When an agent tries to sell you permanent life insurance they will headlight the fact that you can also benefit of cash value if you want. And if you may wonder what you can do with the cash value, then here are some things:
- You can make partial withdrawals. If you are the holder of the policy then you can make partial withdrawals, but in case you will not repay the money, then the payment will be smaller when you die.
- You can borrow against cash value. You can take loans from the sum, but if you want to keep the death benefit, then you will have to repay them with a certain interest decided by the provider of the life insurance cash value
- When the sum reaches a certain point you have the possibility to pay premiums.
- You can also surrender the policy and withdraw the money. This means that you will no longer have a life insurance policy, also this may require you to pay a surrender fee to the provider.
- You will benefit of a fixed rate of return if you opt for a whole life insurance.
Should I consider cash value life insurance?
This type of coverage is useful in multiple cases. If you are a person with high-income earnings then you should consider having this type of insurance. The cash value can be used to pay certain debts in case you will experience this situation towards the end of your life. Also this type of insurance can prove useful if you want a flexible policy