What is the Cash Value of Life Insurance?
An investment perhaps like none other, the money put into a life insurance policy anticipates your death – it assumes that you will not get to spend that money. This kind of investment is not without its merits though, and can actually mean something to the insured in the form of cash value later in life, and can certainly mean a lot to a beneficiary in cash value.
Buying a permanent life insurance policy early in life will allow you to use your building death benefit to pay off the rest of your premium later in life. This gives a certain lump sum separate from your standard permanent life insurance benefit. This additional lump of cash is known as cash value and is uniquely available to whole (permanent) life insurance holders. With term life insurance, holders have no cash value – only the standard death benefit value to those survived by the policy holder.
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Cash value of different life insurance policies
For a 35-year-old non-smoking male with a healthy background and family history, the allowances for death benefits and cash values are fairly high with permanent, whole life insurance. In the fifth year of a policy, at age 40, you will be paying around $1,200 yearly on a $100,000 policy. Fifteen years later, at age 55, you will be 20 years into your policy. The cash value of your policy will have grown to $28,000 and the death benefit will have increased slightly to approximately $105,000.
Nearing life expectancy age at around 70 or 75 years old, the premium paid out of pocket will have dropped to zero. Since your policy was bought at such a young age, the premium will have run out by now, leaving for only cash value (around $55,000) and death benefit (around $110,000).
Whether you ultimately decide on the lower-cost term life insurance (with no cash value account), or the comprehensive whole life insurance plan (usually with a standard cash value account), Life-Insurance-Cash-Value.com can answer any questions you may have. To get started, simply request more information here and an experienced representative will be in contact shortly!