There are three broad categories of life insurance. They are term life, universal, and whole life or permanent insurance. Some types of life insurance policies build up a value over time that is called the “cash value.” Term life policies are limited to a certain number of years. Universal life policies may build up cash value depending on their investment characteristics. Whole life policies always build up cash value.
It may take quite a few years for the cash value to build up in a life insurance policy, so ask your agent at BenefitSource Insurance Services Inc. in Aliso Viejo, CA to explain the details.
What can cash value be used for?
Once a life insurance policy has cash value, many beneficial things happen. A policyholder can borrow against the cash value for very low-interest rates and use the tax-free funds as they like.
If money is tight, the cash value may be accessed to pay the insurance premiums temporarily to get through a rough financial period in life.
If the cash value is significant, which may happen towards the later years of life, it may be used to create a “paid-up status” for the policy. This means that no further premiums need to be paid by the insured for the remainder of their life.
Of course, the policy can always be surrendered to the insurance company for the cash value; however, it is usually better to borrow against it, rather than give up the policy.
How do you calculate cash value?
Your agent can do this calculation for you and there are tables contained in many policies or available online that show the figures. Some policies offer an annual dividend that can either be taken as income by the policyholder or be used to build up cash value.
What should you do?
The nice thing about having a life insurance policy that builds up cash value is that the process happens automatically. This is a nice investment characteristic that provides savings for the future.
Contact your agent at BenefitSource Insurance Services Inc. in Aliso Viejo, CA by calling 949-215-5431 to schedule an appointment and get a quote for life insurance. Let’s discuss your cash value options.