Cash Value Life Insurance
Cash Value Life Insurance is a type of permanent Life Insurance that includes a savings component, which accumulates cash value over time. This cash value grows on a tax-deferred basis and can be accessed by the policyholder through loans or withdrawals. Unlike term Life Insurance, which only provides a death benefit for a specified period, cash value Life Insurance remains in force for the insured’s lifetime, as long as premiums are paid.
Examples:
- Whole Life Insurance: This policy offers a guaranteed cash value growth and fixed premiums throughout the life of the policyholder.
- Universal Life Insurance: This type provides flexible premiums and adjustable death benefits, with cash value that can earn interest based on current market rates.
Cases:
- Policy Loan: A policyholder takes out a loan against the cash value to cover unexpected medical expenses. The loan is repaid with interest, but if not repaid, the amount owed will be deducted from the death benefit.
- Withdrawal: A policyholder decides to withdraw a portion of the cash value to fund a child’s education. This reduces the death benefit but provides immediate financial support.