If you find life insurance a bit confusing, it could be because some terms are used interchangeably. What some refer to as Cash Value Insurance, for example, is also called permanent insurance, whole life insurance, and even permanent whole life insurance. These are all in reference to one of two basic forms of insurance, the other being term insurance.
What exactly is cash value insurance, how does it work, and what are its benefits and drawbacks? Here’s what you should know about cash value insurance:
It Builds in Value
Cash value or permanent whole life insurance has an investment aspect to it that increases in value as the years pass. This is actually a living benefit, as that value can be tapped into as the years pass. The value can be accessed through a policy loan or through surrendering the policy for its current value.
It Can’t Be Canceled by the Insurance Company
A cash value life insurance policy will remain in force no matter the health of the insured. As long as premiums are paid in a timely manner, a whole life insurance policy will remain in force. Some policies even have a “waiver of premium” benefit that covers premium payments should the policy owner become disabled.
Who Benefits from Cash Value Insurance?
This form of insurance is excellent for families or individuals who find it difficult to save money. It serves as life insurance, but has the added value of building in cash value. This also makes it good for children as part of a college fund or future savings.
Does Cash Value Insurance Have a Downside?
Whether cash value insurance is a good “investment” has been debated for generations. On a pure life insurance basis, it tends to be more expensive than term life insurance on a cost-per-thousand basis. Those who need a significant amount of life insurance will likely be able to acquire more coverage through term insurance. Term insurance, however, does not build a cash value.
Many have found that a custom life insurance program that combines whole life and term insurance may be the best option. It can depend on your life situation and budget. Our independent life insurance agents can put together a life insurance program to suit your needs. They can answer your questions and help you determine whether cash value insurance is a good choice for you. Contact us to get started today.