Life insurance provides one of the most important financial safeguards, helping you to protect what matters most should anything happen to you. Life insurance policies are available in a number of different options, each providing different levels of coverage and offering unique advantages.
One of the best policies to invest in is cash value life insurance. These policies are unique, as they will not only provide the coverage you need, but also accumulates value in a separate investment account, or cash value, within the policy.
What Is Cash Value Life Insurance?
Cash value life insurance is a type of life insurance policy designed with a separate investment feature within the policy itself. With these policies, you have the benefit of the life insurance your family will need if anything were to happen to you, but in addition to the death benefit, a portion of the premium you pay is automatically put towards a cash value account. This account can even accumulate interest over time providing you with a safe, long-term savings channel that does not decrease in value.
A cash value account is separate from a death benefit, so it will not affect the amount your loved ones, or listed beneficiaries, would receive should you passed away. The value of this account is not tied to any underlying asset, but rather in the general account of the insurance company, so should you pass away, the cash value remaining in your policy would be kept by the insuring company. Your beneficiaries would not receive any amount of the cash value.
A cash value account is typically available with some common types of life insurance policies including whole life insurance, universal life insurance, indexed universal life insurance, and variable life insurance. With each type of policy, the cash value would grow in a different manner. Term life insurance policies do not provide a cash value option.
What Are The Benefits Of A Cash Value Account?
Choosing a cash value life insurance policy provides you
with the primary benefit of a built-in tax-deferred investment opportunity that
can afford you a number of other financial advantages. Cash value life
insurance provide benefits for financial flexibility such as:
- Lifelong Permanent Coverage: As long as you continue paying your premium, you will continue to have coverage for the entirety of your life.
- Tax-Deferred Benefit: With a cash value policy, your cash value account will grow tax free, benefits are typically paid to beneficiaries free of federal income taxes, and cash value can be accessed tax free.
- Pay Premiums: With certain policies and under certain conditions, cash value assets can even be used to pay premiums.
- Make A Withdrawal: Under certain conditions, you may be able to make a tax-free cash withdrawal up to the amount you have paid into it. Your death benefit will be reduced by the amount you withdraw, but it can provide a solution to financial problems.
- Borrow Rather Than Withdraw: Instead of a complete withdrawal, you can choose to take out a loan up to the cash value amount available on your policy. The loan will not be considered as taxable income, however any amount that is not repaid will be subtracted from the death benefit. The loan will also accrue interest, which can reduce your death benefit even more.
- Option To Surrender Your Policy: If you chose to cancel your policy, you will no longer be insured but you will be given the amount that in the cash value account after loans or unpaid premiums have been deducted.
Nevada Families Insurance
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