Life Insurance Cash Values at a Glance
When you purchase a permanent life insurance policy such as universal, whole, or variable universal life insurance, it comes with an added benefit: a cash value account. Cash value accounts may seem a little confusing at first, but many people use cash value accounts to help them save for retirement, save for children's college education, or even to help pay their premiums later in life. Here's how they work:
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Building capital through a cash value account
When you purchase a form of permanent life insurance, a portion of your premium payments goes toward building up a tax-deferred cash account that grows over a period of time.
When you first purchase your life insurance policy, the value of your cash account will grow slowly in the beginning, but increase in the rate of growth over a period of years. Each year your cash value account will earn interest, which is tax-deferred income.
Benefits of a cash value account at a glance
Once your cash value account has earned enough value, the money in your cash account can be used to pay the premiums on your life insurance policy. You can also use your cash value account to loan yourself money and pay yourself back with interest over a period time.
You can also withdraw all or part of your cash value account. However, doing so could reduce the amount of death benefits your beneficiary will receive depending on the type of policy you purchased. Remember, that when you withdrawal funds from your cash account, that money will be taxed.
If you purchase a permanent life insurance policy for benefit of having the cash account to rely on when you retire, or for unexpected emergencies, be prepared to pay more for the life insurance policy than you would for a term life insurance policy that does not have the cash value account advantage.
Learn more about life insurance with cash value accounts
We are here to assist you in determining which type of permanent life insurance would be the most beneficial to you and your family, and to explain in greater detail how a cash value account may help you. To get started, simply fill out this request and we'll be in touch with you shortly!